<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 9, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TRENDWEST RESORTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
OREGON 6552 93-1004403
(State or other jurisdiction (Primary standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
12301 N.E. 10TH PLACE, BELLEVUE, WASHINGTON 98005, (425) 990-2300
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
GARY A. FLORENCE, VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND TREASURER
TRENDWEST RESORTS, INC.
12301 N.E. 10TH PLACE, BELLEVUE, WASHINGTON 98005, (425) 990-2300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
<TABLE>
<S> <C>
DAVID R. WILSON PETER LILLEVAND
FOSTER PEPPER & SHEFELMAN PLLC ORRICK, HERRINGTON & SUTCLIFFE LLP
1111 THIRD AVENUE, SUITE 3400 OLD FEDERAL RESERVE BANK BUILDING
SEATTLE, WASHINGTON 98101 400 SANSOME STREET
(206) 442-8116 SAN FRANCISCO, CALIFORNIA 94111
(415) 392-1122
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, no par value.... shares $ $46,762,306 $14,978
==================================================================================================
</TABLE>
(1) Includes shares that may be purchased by the Underwriters to cover
over-allotments, if any.
(2) Estimated solely for the purpose of computing the registration fee pursuant
to Rule 457(a).
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED MAY 9, 1997
SHARES
[LOGO]
TRENDWEST RESORTS, INC.
COMMON STOCK
Of the shares of Common Stock ("Common Stock") of Trendwest
Resorts, Inc. (the "Company" or "Trendwest") offered hereby (the "Offering"),
shares are being sold by the Company and shares are being sold
by the Selling Stockholder. See "Principal and Selling Stockholders." The
Company will not receive any proceeds from the sale of shares by the Selling
Stockholder. Prior to the Offering, there has been no public market for the
Common Stock. It is currently estimated that the initial public offering price
will be between $ and $ per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Application has been made to list the Common Stock for quotation on the
Nasdaq National Market under the symbol "TWRI."
SEE "RISK FACTORS" COMMENCING ON PAGE 10 OF THIS PROSPECTUS FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholder
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
Total(3)...................... $ $ $ $
==================================================================================================
</TABLE>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to additional shares of Common Stock solely to cover
over-allotments, if any. If the Underwriters exercise this option in full,
the Price to Public will total $ , the Underwriting Discount will
total $ and the Proceeds to Company will total $ . See
"Underwriting."
The shares of Common Stock are offered by the several Underwriters named
herein, when, as and if delivered and accepted by the Underwriters and subject
to their right to reject any order in whole or in part. It is expected that the
delivery of the certificates representing such shares will be made against
payment therefor at the office of Montgomery Securities on or about
, 1997.
------------------------
MONTGOMERY SECURITIES SALOMON BROTHERS INC
, 1997
<PAGE> 3
The following graphic is depicted:
Map of western U.S., Hawaii, British Columbia and Baja Peninsula
denoting the locations of WorldMark's resorts and the Company's sales
offices and future resort locations.
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING STABILIZING BIDS, SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION
OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THIS PROSPECTUS RELATES ONLY TO THE SALE OF THE COMMON STOCK OFFERED
HEREBY. SHAREHOLDERS OF THE COMPANY ARE NOT ENTITLED TO ANY RIGHTS WITH RESPECT
TO WORLDMARK RESORTS SOLELY AS A RESULT OF THEIR OWNERSHIP OF COMMON STOCK.
TRENDWEST RESORTS(R) and WORLDMARK, THE CLUB(R) are registered trademarks
of the Company and WorldMark, the Club, respectively.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and financial data, including
the financial statements and notes thereto, included elsewhere in this
Prospectus. Except as otherwise noted, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option, (ii) gives
effect to the consummation of the Consolidation Transactions (as defined
herein), which will occur immediately prior to the closing of the Offering, and
(iii) reflects an adjustment for a -for-1 stock split to be effected in May
1997. Unless the context otherwise indicates, the "Company" and "Trendwest" mean
Trendwest Resorts, Inc. after giving effect to the consummation of the
Consolidation Transactions.
THE COMPANY
Trendwest Resorts, Inc. markets, sells and finances timeshare ownership
interests ("Vacation Ownership Interests") and acquires, develops and manages
timeshare resorts. In 1996, Trendwest was ranked as one of the largest timeshare
companies in the United States, according to published sales volume data in the
Vacation Ownership World trade magazine. The Company's timeshare resorts are
owned by and operated through WorldMark, the Club ("WorldMark"), a nonprofit
mutual benefit corporation organized by Trendwest in 1989 to provide an
innovative, flexible vacation ownership system. As of March 31, 1997, WorldMark
had in excess of 41,000 members ("Owners") and owned and maintained an aggregate
of 800 condominium-style units at 19 recreational resorts (the "WorldMark
Resorts") in the western United States, Hawaii, British Columbia and Mexico. The
Company presently sells Vacation Ownership Interests in Washington, Oregon and
California, primarily through eight off-site sales offices.
Trendwest sells Vacation Ownership Interests in the form of perpetual
timeshare credits ("Vacation Credits") which are created by the contribution to
WorldMark of resort units purchased or developed by the Company. Vacation
Credits can be used by Owners to reserve units at any of the WorldMark Resorts,
at any time during the year and in time increments as short as one day. The use
of Vacation Credits is not tied to any particular resort unit or time period as
is typical in the timeshare industry. The Company believes that the combination
of multiple resorts and its Vacation Credit system provides Owners with an
attractive range of vacation planning choices and values not generally available
within the timeshare industry. The Company's Vacation Credit system with
multiple WorldMark Resorts facilitates the sale of Vacation Credits at off-site
sales offices located in major metropolitan areas and reduces dependence on
on-site sales centers located at more remote resort locations.
According to the American Resort Development Association ("ARDA"), the
total annual sales volume for the timeshare industry increased from $490 million
in 1980 to $4.76 billion in 1994 (the latest year for which data is published).
Based on other industry information, the Company believes that timeshare sales
volume for the timeshare industry exceeded $5 billion in 1995. The Company
believes that, based on ARDA reports, the timeshare industry has benefited
recently from increased consumer acceptance of the timeshare concept resulting
from more effective governmental regulation of the industry, the entry into the
industry by national lodging and hospitality companies and increased vacation
flexibility resulting from the growth of timeshare exchange networks. The
Company expects the timeshare industry to continue to grow as consumer awareness
of the timeshare industry increases and as the baby boom generation (currently
ages 32-50) moves through the 40-55 year age bracket, the age group of persons
who purchased the most timeshare interests in 1994.
The Company believes its operating strategy and vacation ownership system
provide the following advantages over other timeshare companies:
- Vacation Flexibility. The Company's Vacation Credit system allows Owners
access to multiple WorldMark Resorts, permitting them to tailor their
vacation according to their schedules, desired vacation length, location
preferences and space requirements. The 19 WorldMark Resort locations
provide access to a variety of vacation experiences, from skiing to golf,
and a variety of settings, from beaches to mountains. Vacation time is
reserved on a first come, first served basis. In 1996, based on
3
<PAGE> 5
information provided by Owner comment cards, the Company believes that
approximately 73% of Owners received their first choice of resort location
when reserving vacation time. To enhance Owner usage and facilitate weekend
stays and stays shorter than one week, the Company purchases and develops a
large percentage of WorldMark Resort units within a reasonable driving
distance of the Company's primary metropolitan sales markets.
- Appeal to Broad Consumer Base. The Company believes its Vacation Credit
system enables it to market more effectively to potential customers with a
broader range of income levels and vacation requirements than is addressed
by most timeshare companies. The Company provides prospective purchasers
with the opportunity to purchase varying increments of Vacation Credits
suitable for their financial position and vacation needs. The Company's
minimum purchase requirement of 6,000 Vacation Credits, which presently
costs $7,800, makes entry into WorldMark affordable for a significant
number of households. The Company also offers additional Vacation Credits
to existing Owners ("Upgrades") in smaller increments, which accounted for
approximately 13% of Vacation Credit sales in 1996.
- Marketing Through Off-Site Sales Offices. The Company's Vacation Credit
system facilitates marketing Vacation Ownership Interests effectively at
off-site sales offices. The Company believes the use of off-site sales
offices enables it to attract a larger number of prospective purchasers to
sales presentations than at sales offices at more remote resort locations.
In addition, the location of sales offices in metropolitan areas provides
the Company with the flexibility to establish sales offices in the most
demographically attractive areas within a geographic market and to relocate
sales offices quickly at a modest cost when conditions warrant.
- Inventory Control. The Company's sale of Vacation Credits rather than
deeded interests with weekly intervals at individual resorts enables it to
schedule its resort acquisition and development activities in accordance
with its anticipated sales volumes and to diversify the risk of its capital
commitments among several resorts. Since all Vacation Credits have the same
use rights and sell for the same price, the Company does not experience a
buildup of inventory of less desirable resort units or interval dates which
are difficult to sell. The Company can also develop resorts at desirable
remote locations since it does not depend on on-site sales offices to
generate sales.
- Owner Satisfaction. The Company places great importance on Owner
satisfaction. The Company believes that Owner satisfaction is achieved by
maintaining a high level of quality at WorldMark Resorts, by increasing the
number of resort locations and by satisfying Owners' first vacation
requests a high percentage of the time. Of the 19 WorldMark Resorts, 12
have the highest rating from Resort Condominiums International Inc.
("RCI"), the world's largest timeshare exchange network, four have the
second-highest rating from RCI, and three have been recently opened and
have not yet been rated. The Company has increased the number of WorldMark
Resorts from three in 1989 to its present 19 and intends to contribute two
additional WorldMark Resorts during the remainder of 1997 and two
additional WorldMark Resorts in 1998. Although Owners have exchange
privileges through the RCI network, the Company believes that Owner
satisfaction with the WorldMark Resorts is demonstrated by the Owners'
usage of approximately 74% of their Vacation Credits at WorldMark Resorts
in 1996. The satisfaction of existing Owners with the WorldMark Resorts
generates additional revenues to the Company through the sale of Upgrades
("Upgrade Sales") and from Owner referrals of new prospects.
The Company's growth strategy is to (i) expand existing WorldMark Resorts
and acquire and develop additional resorts primarily in the western United
States, Hawaii, British Columbia and Mexico to provide additional Vacation
Credits for sale by the Company and a wider range of WorldMark Resorts for use
by Owners; (ii) increase sales and financings of Vacation Credits to new
customers by expanding sales and marketing efforts, including opening additional
off-site sales offices; and (iii) increase Upgrade Sales by establishing and
maintaining long-term relationships with Owners through effective customer
service programs and innovative benefit programs and discount packages.
The Company's Vacation Ownership Interests are generally targeted to
purchasers in an age range from 35 to 60 with annual household incomes ranging
from $30,000 to $100,000. The average number of Vacation Credits purchased by a
new Owner in 1996 was approximately 6,600 at a cost of approximately $8,600. The
4
<PAGE> 6
number of Vacation Credits that is required to stay one day at the WorldMark
Resorts varies, depending upon the resort location, the size of the unit, the
vacation season and the day of the week. For example, a Friday or Saturday night
stay at a one-bedroom unit may require 825 Vacation Credits per night off-season
and 1,450 Vacation Credits per night in peak season. WorldMark Resort units are
fully furnished, condominium style accommodations and range in size from studios
to three bedrooms. WorldMark's participation in RCI provides Owners with access
to over 3,000 resorts worldwide which participate in the RCI network.
The Company sells Vacation Credits at its 11 sales offices, eight of which
are located off-site in metropolitan areas. The other sales offices are located
on-site at three of the WorldMark Resorts. The Company intends to establish an
additional off-site sales office in California in late 1997. The Company
contributed 224 resort units to WorldMark in 1996, 146 resort units in 1995 and
86 resort units in 1994. Revenues from Vacation Credit sales increased to
approximately $100.0 million in 1996 from approximately $77.8 million in 1995
and approximately $54.9 million in 1994. The Company contributed 48 resort units
to WorldMark during the first quarter of 1997. As of March 31, 1997, the Company
had purchase agreements and developments in progress to obtain an additional 163
units that are expected to be available during the remainder of 1997 and an
additional 201 units that are expected to be available during 1998. See
"Business -- Growth Strategy."
Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, a significant portion of its sales of
Vacation Credits to new Owners is financed by the Company, thereby allowing
Owners to make monthly payments. In addition, existing Owners have the
opportunity to finance the purchase of Upgrades through the Company. At December
31, 1996, loans to Owners to finance the purchase of Vacation Credits ("Notes
Receivable") with an aggregate balance of $179.2 million were outstanding, of
which approximately $52.4 million with a weighted average interest rate of 14.1%
per annum had been retained by the Company. The remaining Notes Receivable
balance of approximately $126.8 million had been sold by the Company prior to
that date, although the Company retained limited recourse liability with respect
to these Notes Receivable. The Company may continue to sell a substantial amount
of its Notes Receivable. See "Business -- Customer Financing" and "-- Finance
Subsidiaries."
5
<PAGE> 7
THE WORLDMARK RESORTS
The following table sets forth certain information as of March 31, 1997
regarding each existing WorldMark Resort, planned expansion at existing
WorldMark Resorts through 1998, and planned new WorldMark Resorts through 1998.
<TABLE>
<CAPTION>
EXISTING
DATE UNITS
CONTRIBUTED IN PLANNED TOTAL UNITS
EXISTING RESORTS LOCATION TO WORLDMARK(a) SERVICE EXPANSION ANTICIPATED RCI RATING(B)
- ------------------------- ------------------ --------------- -------- --------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C>
BRITISH COLUMBIA
Sundance Whistler February 1992 25 -- 25 R.I.D.
CALIFORNIA
North Shore Estates Bass Lake September 1992 61 -- 61 Gold Crown
Beachcomber Pismo Beach April 1993 20 -- 20 Gold Crown
Palm Springs Palm Springs July 1995 64 -- 64 Gold Crown
Big Bear Big Bear Lake April 1996 12 58(c) 70 (d)
HAWAII
Valley Isle Maui December 1990 14 -- 14(e) Gold Crown
Kapaa Shores Kauai June 1991 42 -- 42(e) R.I.D.
NEVADA
Lake Tahoe Stateline January 1991 50 -- 50 Gold Crown/R.I.D.(f)
Las Vegas Las Vegas December 1996 42 -- 42 (d)
OREGON
Eagle Crest Redmond September 1989 63 (g) 63(e) Gold Crown
Gleneden Beach Lincoln City February 1996 80 -- 80 Gold Crown
Running Y Ranch Klamath Falls February 1997 27 40(h) 67 (d)
WASHINGTON
Lake Chelan Shores Chelan July 1990 13 -- 13(e) R.I.D.
Surfside Long Beach September 1991 25 -- 25 R.I.D.
Discovery Bay Sequim January 1992 32 -- 32 Gold Crown
Park Village Leavenworth July 1992 72 -- 72 Gold Crown
Mariner Village Ocean Shores June 1994 32 -- 32 Gold Crown
Birch Bay Blaine January 1995 52 52(i) 104 Gold Crown
MEXICO
Coral Baja San Jose del Cabo November 1994 74 62(j) 136 Gold Crown
PLANNED RESORTS
- -------------------------
Clear Lake Nice, California (k) -- 88(k) 88
Kona Hawaii, Hawaii (l) -- 64(l) 64
--- --- -----
Total........ 800 364 1,164
=== === =====
</TABLE>
- ---------------
(a) The dates in this column indicate, for each resort, the month and year in
which the first completed units at such resort were contributed to
WorldMark. At certain resorts, additional units were contributed to
WorldMark at later dates.
(b) Gold Crown and Resort of International Distinction ("R.I.D.") are resort
ratings awarded annually by RCI. In 1996, approximately 13% of the resorts
reviewed by RCI received a Gold Crown rating, the highest rating awarded by
RCI, and approximately 14% of the resorts reviewed by RCI received an R.I.D.
rating, the second-highest rating awarded by RCI.
(c) Construction began on these units in January 1997. These units are expected
to be completed and contributed to WorldMark in the second and third
quarters of 1997.
(d) This resort has recently become available to WorldMark and has not yet been
rated by RCI.
(e) These units represent less than one-half of the total number of units at
this resort.
(f) Consists of three locations totalling 50 units. The units at Tahoe I and II
(totalling 15 units) are rated R.I.D., and the units at Tahoe III
(totalling 35 units) are rated Gold Crown.
(g) The Company has an agreement with Eagle Crest, Inc. ("Eagle Crest") whereby
the Company has assigned to Eagle Crest the right to sell Vacation Credits
in WorldMark at the Eagle Crest Resort and to retain the gross proceeds from
such sales. In exchange for such sales, Eagle Crest must transfer
condominium units to WorldMark at no cost to either the Company or
WorldMark. In addition, commencing July 1997, the Company will receive a fee
from Eagle Crest equal to 3% of net sales of Vacation Credits occurring at
6
<PAGE> 8
the Eagle Crest Resort. See "Certain Transactions -- Relationship with
Jeld-Wen." The number of additional units to be deeded to WorldMark will
depend on the number of Vacation Credits sold by Eagle Crest, an estimate of
which is not provided in this table.
(h) The Company is obligated to purchase 20 units in April 1998 and 20 units in
July 1998. Units will be contributed to WorldMark as they are purchased. The
Company has an agreement with Running Y Resort, Inc. ("Running Y") whereby
the Company has assigned to Running Y the right to sell Vacation Credits in
WorldMark at the Running Y Resort and to retain the gross proceeds from such
sales. In exchange for such sales, Running Y must transfer condominium units
to WorldMark at no cost to either the Company or WorldMark. In addition,
commencing July 1997, the Company will receive a fee from Running Y equal to
3% of net sales of Vacation Credits occurring at the Running Y Resort. See
"Certain Transactions -- Relationship with Jeld-Wen." The number of
additional units to be deeded to WorldMark will depend on the number of
Vacation Credits sold by Running Y, an estimate of which is not provided in
this table.
(i) The Company expects to obtain all necessary permits for construction by the
end of the second quarter of 1998. All 52 units are expected to be completed
and contributed to WorldMark by the end of 1998.
(j) Construction on these units began in July 1996. The project is expected to
add 62 units, with five units contributed to WorldMark each month beginning
December 1997 and all units are expected to be contributed by the end of
1998.
(k) Construction on these units began in April 1997. Of these units, 50 are
expected to be completed and contributed to WorldMark in the third quarter
of 1997, and the remaining 32 units are expected to be completed and
contributed to WorldMark in the first quarter of 1998.
(l) Construction on these units began in February 1997. Of these units, 44 are
expected to be completed and contributed to WorldMark in the fourth quarter
of 1997 and the remaining 20 units are expected to be completed and
contributed to WorldMark in the first quarter of 1998.
SALES REGIONS
The Company's sales of Vacation Credits primarily occur at eight off-site
sales offices located in metropolitan areas in three regions. The remainder of
the Company's sales of Vacation Credits occur at three on-site sales offices.
The Company plans to open a new off-site sales office in California in late
1997. Certain information with respect to the Company's sales offices in the
three regions is provided below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------------------------------
1994 1995 1996
--------------------------------------- --------------------------------------- ---------------------------------------
(DOLLARS IN THOUSANDS)
AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER
OF SALES NUMBER OF OF SALES NUMBER OF OF SALES NUMBER OF
REGION REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3)
- ------- ------------------- --------- ------- ------------------- --------- ------- ------------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pacific
Northwest(4).. 54 11,367 $31,654 83 17,157 $43,926 104 23,907 $ 54,313
Northern
California(5).. 35 7,297 23,250 60 10,327 31,324 66 13,702 37,287
Southern
California(6).. -- -- -- 6 295 2,533 22 1,222 8,440
-- ------ ------- --- ------ ------- --- ------ --------
Total... 89 18,664 $54,904 149 27,779 $77,783 192 38,831 $100,040
== ====== ======= === ====== ======= === ====== ========
</TABLE>
- ------------------------
(1) Represents the average number of sales representatives during the year. This
calculation is based on the number of sales representatives at the end of
each calendar quarter during the indicated year.
(2) Cumulative number of Owners at the end of the year, excluding Owners who
purchased Vacation Credits at Eagle Crest and Running Y.
(3) Includes Upgrade Sales.
(4) Comprised of three off-site sales offices (Kirkland, Washington, which
opened in October 1989 and moved to Seatac, Washington in February 1994;
Vancouver, Washington, which opened in February 1994; and Lynnwood,
Washington, which opened in June 1995) and three on-site sales offices
(Leavenworth, Washington, which opened in September 1994, Birch Bay,
Washington, which opened in June 1995, and Gleneden Beach, Oregon, which
opened in February 1996). These figures include an off-site sales office in
Bellingham, Washington, which opened in July 1990, and was consolidated into
the Lynnwood and Birch Bay offices in June 1995.
(5) Comprised of three off-site sales offices: Santa Clara, which opened in
April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened
in May 1995.
(6) Comprised of the Ontario off-site sales office which opened in April 1996.
These figures include sales from an on-site sales office at Palm Springs,
which opened in April 1995 and was consolidated into the Ontario sales
office in August 1996. The Company opened a new off-site sales office in
Costa Mesa in February 1997.
7
<PAGE> 9
CORPORATE BACKGROUND AND CONSOLIDATION OF FINANCE SUBSIDIARIES
The Company commenced its timeshare business as a wholly-owned subsidiary
of JELD-WEN, inc. ("Jeld-Wen") in 1989 with three condominium units. Jeld-Wen is
currently the Company's principal stockholder. See "Principal and Selling
Stockholders." Jeld-Wen is a privately owned company that was founded in 1960
and is a major manufacturer of doors, windows and millwork products.
Headquartered in Klamath Falls, Oregon, Jeld-Wen has diversified operations
located throughout the United States and in nine foreign countries that include
manufacturing, hospitality and recreation, retail, financial services and real
estate. Along with its subsidiaries, Jeld-Wen employs approximately 12,000
people.
The Company raises capital for property acquisitions and working capital by
selling or securitizing Notes Receivable through two subsidiaries of Jeld-Wen
(the "Finance Subsidiaries"). Immediately prior to the closing of the Offering,
the Company will acquire the Finance Subsidiaries from Jeld-Wen for
shares of the Company's Common Stock (the "Consolidation Transactions"). The
value of the shares of the Finance Subsidiaries and the value of the shares of
the Company's Common Stock were determined in negotiations between Jeld-Wen and
the Company. The Company may continue its program of selling and securitizing
Notes Receivable through the Finance Subsidiaries or similar entities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Transactions -- Acquisition of Finance Subsidiaries."
All of the WorldMark Resort units are owned by WorldMark, a California
nonprofit mutual benefit corporation that was formed by Trendwest in 1989 in
order to implement its Vacation Credit system. WorldMark's articles of
incorporation provide that the specific purpose for which it was formed is to
own, operate and manage the real property contributed to it by the Company.
Owners receive the right to use all WorldMark Resort units at any available time
and interval selected by the Owner. Trendwest has a management agreement with
WorldMark whereby Trendwest acts as the exclusive manager and servicing agent of
WorldMark and the Vacation Ownership Interest program.
The Company was incorporated in Oregon in 1989. The Company's principal
executive offices are located at 12301 N.E. 10th Place, Bellevue, Washington
98005, and its telephone number is (425) 990-2300.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered:
By the Company.................................... shares
By the Selling Stockholder........................ shares
Common Stock to be outstanding after the Offering... shares(1)
Use of proceeds..................................... To repay outstanding indebtedness, to
purchase and develop additional
resorts and for working capital and
other general corporate purposes.
Proposed Nasdaq National Market symbol.............. TWRI
</TABLE>
- ---------------
(1) Does not include shares of Common Stock authorized for issuance
under the Company's stock option plan. See "Management -- 1997 Stock Option
Plan."
8
<PAGE> 10
SUMMARY COMBINED FINANCIAL AND OPERATING INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Vacation Credit sales, net................................. $35,798 $38,743 $54,904 $77,783 $100,040
Finance income............................................. 3,069 3,813 3,736 5,368 7,143
Gains on sales of notes receivable......................... -- 1,558 1,635 3,222 5,673
Resort management services................................. 219 1,102 2,805 1,579 1,501
Other...................................................... 241 344 763 1,226 2,552
------- ------- ------- ------- --------
Total revenues............................................... 39,327 45,560 63,843 89,178 116,909
------- ------- ------- ------- --------
Costs and operating expenses:
Vacation Credit cost of sales.............................. 9,083 8,743 15,070 20,484 27,400
Resort management services................................. 301 959 2,613 1,283 859
Sales and marketing........................................ 17,954 19,523 25,615 36,374 47,810
General and administrative................................. 3,253 4,056 6,588 8,391 10,904
Provision for doubtful accounts and recourse liability..... 2,031 2,805 4,537 6,522 7,467
Interest................................................... 2,457 1,929 881 2,380 2,445
------- ------- ------- ------- --------
Total costs and operating expenses........................... 35,079 38,015 55,304 75,434 96,885
------- ------- ------- ------- --------
Income before income taxes..................................... 4,248 7,545 8,539 13,744 20,024
Income tax expense......................................... 1,542 2,909 3,214 4,979 7,348
------- ------- ------- ------- --------
Net income..................................................... $ 2,706 $ 4,636 $ 5,325 $ 8,765 $ 12,676
======= ======= ======= ======= ========
PRO FORMA DATA:
Pro forma net income(1)........................................ $ 14,281
Pro forma net income per share of Common Stock(1)..............
Pro forma weighted average shares of Common Stock
outstanding..................................................
EBITDA(2)...................................................... $ 6,881 $ 9,759 $10,605 $17,935 $ 25,706
OPERATING DATA:
Number of WorldMark Resorts (at end of period) ................ 11 12 14 16 18
Number of units (at end of period)............................. 147 239 325 499 746
Number of Vacation Credits sold (in thousands)................. 32,761 34,335 47,181 64,503 80,248
Average price per Vacation Credit sold......................... $ 1.09 $ 1.13 $ 1.16 $ 1.21 $ 1.25
Average cost per Vacation Credit sold.......................... $ 0.28 $ 0.26 $ 0.32 $ 0.32 $ 0.34
Number of Owners (at end of period)............................ 8,252 12,732 18,740 27,965 38,997
Average purchase price for new Owners.......................... $ 7,909 $ 8,190 $ 8,244 $ 8,460 $ 8,609
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------
ACTUAL AS ADJUSTED(3)
------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, including restricted cash......................................................... $ 802 $ 14,342
Total assets............................................................................ 84,659 98,199
Indebtedness(4)......................................................................... 22,371 1,055
Stockholders' equity.................................................................... 49,744 84,600
</TABLE>
- ---------------
(1) Reflects the issuance of shares of Common Stock offered by the Company
hereby, the retirement of $21.3 million of debt and the elimination of
interest expense related to the retirement of $21.3 million of debt.
(2) As shown below, EBITDA represents net income before interest expense, income
taxes, depreciation and amortization. EBITDA does not represent cash flows
from operations and should not be considered to be an alternative to net
income as an indicator of operating performance or as an alternative to cash
flows from operations as a measure of liquidity. In addition, the Company's
presentation of EBITDA could differ from similar presentations prepared by
other companies. Management believes that EBITDA represents a useful measure
to evaluate the Company's results of operations, without reference to its
capitalization and tax structure. Management also believes EBITDA is a
useful indicator of the Company's ability to service and/or incur
indebtedness because it adjusts net income for non-cash expenditures, taxes
and existing interest expenses. The following table reconciles EBITDA to net
income:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1992 1993 1994 1995 1996
-------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Net income..................................................... $2,706 $4,636 $ 5,325 $ 8,765 $12,676
Interest expense............................................... 2,457 1,929 881 2,380 2,445
Taxes.......................................................... 1,542 2,909 3,214 4,979 7,348
Depreciation................................................... 176 285 302 330 502
Amortization of excess servicing asset......................... -- -- 883 1,481 2,735
------ ------ ------- ------- -------
EBITDA......................................................... $6,881 $9,759 $10,605 $17,935 $25,706
====== ====== ======= ======= =======
</TABLE>
(3) Adjusted to give effect to (i) the sale of shares of Common Stock
offered by the Company hereby at an assumed initial public offering price of
$ per share less the underwriting discount and the payment by the
Company of the estimated offering expenses and (ii) the retirement of $21.3
million of debt. See "Use of Proceeds."
(4) Indebtedness is comprised of notes payable to Jeld-Wen and others.
9
<PAGE> 11
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be carefully considered in evaluating the Company
and its business before purchasing any of the shares of Common Stock offered
hereby. The Company cautions the reader that this list of risk factors may not
be exhaustive. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results and the timing of certain
events could differ materially from those anticipated by such forward-looking
statements as a result of certain factors, including the factors set forth below
and in "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business," as well as those discussed elsewhere in this
Prospectus.
DEPENDENCE ON ACQUISITIONS OF ADDITIONAL RESORT UNITS FOR GROWTH; NEED FOR
ADDITIONAL CAPITAL
The Company purchases or develops resort units for WorldMark in exchange
for the exclusive right to sell the Vacation Credits assigned to these units.
The Company can only sell additional Vacation Credits to the extent that it
acquires or develops additional resort units for WorldMark. The Company's future
growth and financial success therefore will depend to a significant degree on
the availability of attractive resort locations and the Company's ability to
acquire and develop additional resort units on favorable terms and to obtain
additional debt and equity capital to fund such acquisitions and development.
There can be no assurance that the Company will be successful in this regard. As
of March 31, 1997, the Company had purchase agreements and developments in
progress to obtain 364 additional resort units by the end of 1998. No assurance
can be given that all of such units will be acquired or completed on a timely
basis or at all. There are numerous potential buyers of resort real estate
competing to acquire resort properties which the Company may consider attractive
resort acquisition opportunities, and many of these potential buyers are better
capitalized than the Company. There can be no assurance that the Company will be
able to compete against such other buyers successfully.
When the Company purchases or develops a new resort or additional units at
an existing WorldMark Resort, the Company causes the units to be conveyed
directly to WorldMark free of any monetary encumbrances, and therefore must
purchase its properties without any financing secured by the properties. Since
the Company generally finances at least 85% of the aggregate purchase price of
Vacation Credits sold to new Owners, it does not generate sufficient cash from
sales to provide the necessary capital to acquire or develop additional resort
units. Accordingly, the Company has a continuous need for capital to purchase
additional resort units. Historically, the Company's primary source of capital
has been the sale of Notes Receivable to a group of banks and a securitization,
through one of the Finance Subsidiaries, of Notes Receivable to institutional
investors which was completed in April 1996. Immediately prior to the closing of
the Offering, Jeld-Wen will transfer the ownership of the Finance Subsidiaries
to the Company in exchange for additional shares of the Company's Common Stock.
See "Summary -- Corporate Background and Consolidation of Finance Subsidiaries."
The Finance Subsidiaries' relationship with the participating banks is expected
to continue following the Consolidation Transactions. No assurance can be given,
however, that the Company will be able to obtain adequate debt or equity capital
through the sale or securitization of its Notes Receivables, or otherwise, in
order to continue to acquire additional properties or that such future financing
can be obtained on terms favorable to the Company. See "Business -- Finance
Subsidiaries" and "Certain Transactions -- Acquisition of Finance Subsidiaries."
RISKS ASSOCIATED WITH DEVELOPMENT AND CONSTRUCTION ACTIVITIES
The Company intends to expand its acquisition, development, construction
and expansion of timeshare resorts. There can be no assurance that the Company
will complete current or future development or expansion projects. Risks
associated with these activities include the risks that (i) acquisition or
development opportunities may be abandoned; (ii) construction costs may exceed
original estimates, possibly making the development or expansion uneconomical or
unprofitable; (iii) financing may not be available on favorable terms or at all;
and (iv) construction may not be completed on schedule, resulting in increased
interest expense and delays in the availability for sale of Vacation Credits.
Development activities are also subject to risks relating to the inability to
obtain, or delays in obtaining, all necessary zoning,
10
<PAGE> 12
land-use, building, occupancy and other required governmental permits and
authorizations, the ability of the Company to coordinate construction activities
with the process of obtaining such permits and authorizations, and the ability
of the Company to obtain the financing necessary to complete the necessary
acquisition, construction and conversion work. In addition, the Company's
construction activities are generally performed by third-party contractors.
These third-party contractors generally control the timing, quality and
completion of the construction activities. Nevertheless, construction claims may
be asserted against the Company for construction defects and such claims may
give rise to liabilities. New development activities, regardless of whether or
not they are ultimately successful, typically require a substantial portion of
management's time and attention. The ability of the Company to expand its
business to include new resorts will in part depend upon the availability of
suitable properties at reasonable prices and the availability of financing for
the acquisition and development of such properties. In the future, the Company
may undertake the development of larger resort complexes. No assurance can be
given that any such larger resort complexes will be developed in a profitable
manner, if at all.
FACTORS AFFECTING SALES VOLUME
As the number of potential customers in the geographic area of a sales
office who have attended a sales presentation increases, the Company may have
increasing difficulty in attracting additional potential customers to a sales
presentation at that office and it may become increasingly difficult for the
Company to maintain current sales levels at its existing sales offices.
Accordingly, the Company anticipates that a substantial portion of its future
sales growth will depend on the opening of additional off-site sales offices.
The Company intends to open an additional off-site sales office in California in
late 1997. No assurance can be given, however, that sales from existing or new
off-site sales offices will meet management's expectations. If the Company does
not open additional sales offices or if existing or new sales offices do not
perform as expected, the Company's business, results of operations and financial
condition could be materially adversely affected.
GEOGRAPHIC CONCENTRATION ON WEST COAST
The Company presently sells Vacation Credits in Washington, Oregon and
California, primarily to residents of those states and of British Columbia. The
Company intends to continue to sell Vacation Credits in these three states and
to increase the number of its off-site sales offices in California. Since all of
the Company's sales offices are in the western United States, any economic
downturn in this area of the country could have a material adverse effect on the
Company's business, results of operations and financial condition. In addition,
the appeal of becoming an Owner may decrease if residents of Washington, Oregon,
California and British Columbia do not continue to view the locations of
WorldMark's Resorts (which are primarily located in these areas) as attractive
vacation destinations.
GENERAL ECONOMIC CONDITIONS; CONCENTRATION IN TIMESHARE INDUSTRY
Any downturn in economic conditions or significant price increases or
adverse events related to the travel and tourism industry, such as the cost and
availability of fuel, could depress discretionary consumer spending and have a
material adverse effect on the Company's business, results of operations and
financial condition. Any such economic conditions, including recession, may also
adversely affect the future availability of attractive financing rates for the
Company or its customers and may materially adversely affect the Company's
business. Furthermore, adverse changes in general economic conditions may
adversely affect the collectibility of the Notes Receivable. Because the
Company's operations are conducted solely within the timeshare industry, any
adverse changes affecting the timeshare industry, such as a reduction in demand
for timeshare units, changes in travel and vacation patterns, an increase of
governmental regulation of the timeshare industry and increases in construction
costs or taxes, as well as negative publicity for the timeshare industry, could
have a material adverse effect on the Company's business, results of operations
and financial condition.
11
<PAGE> 13
RISKS ASSOCIATED WITH CUSTOMER FINANCING
In 1996, the Company provided financing for approximately 87% of the
aggregate purchase price of Vacation Credits sold to new Owners, with an average
new Note Receivable of approximately $7,650. The Company also allows existing
Owners the opportunity to finance the purchase of Upgrades. The Company obtains
a security interest in the purchased Vacation Credits and it does not verify a
prospective Owner's credit history. At December 31, 1996, an aggregate of $179.2
million of Notes Receivable were outstanding, of which approximately $52.4
million had been retained by the Company. The remaining balance of approximately
$126.8 million of Notes Receivable had been sold by the Company prior to that
date, although the Company retained limited recourse liability with respect to
these Notes Receivable. See Notes 4, 5 and 15(a) of Notes to Combined Financial
Statements.
Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At December 31, 1996, approximately $3.2 million of
Notes Receivable, including Notes Receivable previously sold by the Company,
were past due 60 days or more. The Notes Receivable are secured by a security
interest in the related Vacation Credits. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records an expense for any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits to inventory available for resale. However, the associated marketing
costs and sales commissions are not recovered by the Company and these expenses
must be incurred again to resell the Vacation Credits.
The Company maintains a reserve for doubtful accounts in respect of the
Notes Receivable owned by the Company and a reserve for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these reserves at December 31, 1995 and 1996 were $8.0
million and $11.2 million, respectively, representing approximately 6.3% of the
total portfolio of Notes Receivable at those dates, including the Notes
Receivable that had been sold by the Company. These reserves are estimates and
if the amount of the Notes Receivable that is ultimately uncollectible
materially exceeds the related reserves, the Company's business, results of
operations and financial condition could be materially adversely affected. See
"Business -- Customer Financing."
INTEREST RATE RISK
The Company generally provides financing for a significant portion of the
aggregate purchase price of Vacation Credits sold at a fixed interest rate. In
order to provide liquidity, the Company, through the Finance Subsidiaries, sells
or securitizes its Notes Receivable. Although a significant portion of the
existing financing of the Notes Receivable through the Finance Subsidiaries is
at a fixed rate or at a variable rate with a cap on the maximum rate, if
interest rates were to increase significantly, the Company's future cost of
funds would also likely increase significantly. The Company has the ability to
respond to rising interest rates by increasing the interest rate offered to
finance Vacation Credit purchases. However, such an increase could have a
material adverse effect on sales of Vacation Credits or on the percentage of
Owners who finance their Vacation Credit purchases through the Company, which
could have a material adverse effect on the Company's business, results of
operations and financial condition. See "Business -- Customer Financing" and "--
Finance Subsidiaries."
COMPETITION
The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Some of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
interval resorts include Marriott International, Inc. ("Marriott"), The Walt
Disney Company ("Disney"), Hilton Hotels Corporation ("Hilton"), Hyatt
Corporation ("Hyatt"), Four Seasons Hotels & Resorts, Inc. ("Four Seasons"),
InterContinental Hotels and Resorts, Inc. ("Inter-
12
<PAGE> 14
Continental"), Westin Hotels & Resorts ("Westin") and Promus Hotels, Inc.
("Promus"). In addition, other publicly-traded companies focused on the
timeshare industry, such as Signature Resorts, Inc. ("Signature"), Fairfield
Communities, Inc. ("Fairfield") and Vistana, Inc. ("Vistana"), currently
compete, or may in the future compete, with the Company. Many of these entities
possess significantly greater financial, marketing and other resources than
those of the Company. Management believes that industry competition will be
increased by recent and potential future consolidation in the timeshare
industry.
The Company has entered into marketing agreements with affiliates of its
parent, Jeld-Wen, pursuant to which these affiliates may market Vacation Credits
for their own account at Eagle Crest Resort in Redmond, Oregon and Running Y
Resort in Klamath Falls, Oregon in exchange for their contribution to WorldMark
of condominium units at those resorts. These sales activities are competitive
with the Company's marketing activities, particularly in the Oregon and northern
California markets. See "Certain Transactions -- Relationship with Jeld-Wen."
Resales of Vacation Credits by Owners may compete with sales of Vacation
Credits by the Company and may inhibit the Company's ability to increase the
market price of Vacation Credits it sells.
DEPENDENCE ON KEY PERSONNEL
The Company's success depends to a large extent upon the experience and
abilities of William F. Peare, the Company's President and Chief Executive
Officer, Jeffery P. Sites, the Company's Executive Vice President and Chief
Operating Officer, and Gary A. Florence, the Company's Vice President, Chief
Financial Officer and Treasurer. The loss of the services of any one of these
individuals could have a material adverse effect on the Company's business,
results of operations and financial condition. Prior to the closing of the
Offering, the Company intends to enter into employment agreements with Messrs.
Peare and Sites. The Company's success is also dependent upon its ability to
attract and retain qualified development, acquisition, marketing, management,
administrative and sales personnel for which there is keen competition. In
addition, the cost of retaining such key personnel could escalate over time.
There can be no assurance that the Company will be successful in attracting and
retaining such personnel. See "Management -- Employment Agreements."
REGULATION OF MARKETING AND SALES OF VACATION CREDITS; OTHER LAWS
The Company's marketing and sales of Vacation Credits and certain of its
other operations are subject to extensive regulation by the states and foreign
jurisdictions in which the WorldMark Resorts are located and in which Vacation
Credits are marketed and sold and also by the federal government.
State and Provincial Regulations. Most U.S. states and Canadian provinces
have adopted specific laws and regulations regarding the sale of vacation
interval ownership programs. Washington, Oregon, California, Hawaii and British
Columbia require the Company to register WorldMark Resorts, the Company's
vacation program and the number of Vacation Credits available for sale in such
state or province with a designated state or provincial authority. The Company
must amend its registration if it desires to increase the number of Vacation
Credits registered for sale in that state or province. Either the Company or the
state or provincial authority assembles a detailed offering statement describing
the Company and all material aspects of the project and sale of Vacation
Credits. The Company is required to deliver the offering statement to all new
purchasers of Vacation Credits, together with certain additional information
concerning the terms of the purchase. Hawaii imposes particularly stringent and
broad regulation requirements for the sale of interests in interval ownership
programs that have resort units located in Hawaii. The Company has incurred
substantial expenditures over an extended period of time in the registration
process in Hawaii and still has not completed this process. Hawaii has allowed
the use of WorldMark units in Hawaii, provided that the Company continues in
good faith to pursue registration in Hawaii. Laws in each state where the
Company sells Vacation Credits grant the purchaser of Vacation Credits the right
to cancel a contract of purchase at any time within a period ranging from three
to seven calendar days following the later of the date the contract was signed
or the date the purchaser received the last of the documents required to be
provided by the Company. Most states have other laws which regulate the
Company's activities, such as real estate licensure laws, laws relating to the
use
13
<PAGE> 15
of public accommodations and facilities by disabled persons, sellers of travel
licensure laws, anti-fraud laws, advertising laws and labor laws.
Federal Regulations. The Federal Trade Commission has taken an active
regulatory role in the interval ownership industry through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-In-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Standards Practices Act, the Telephone Consumer
Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act,
the Civil Rights Act of 1964 and 1968, the Fair Housing Act and the Americans
with Disabilities Act.
Although the Company believes that it is in material compliance with all
federal, state, local and foreign laws and regulations to which it is currently
subject, there can be no assurance that it is in fact in compliance. Any failure
by the Company to comply with applicable laws or regulations could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company will continue to incur significant
costs to remain in compliance with applicable laws and regulations, and such
costs could increase substantially in the future.
DEPENDENCE ON VACATION INTERVAL EXCHANGE NETWORK; NO ASSURANCE OF CONTINUED
PARTICIPATION
The attractiveness of purchasing Vacation Credits is enhanced by the
ability of Owners to exchange Vacation Credits for an occupancy right in a
resort participating in the RCI network. RCI provides broad-based vacation
interval exchange services, and, subject to payment of a fee to RCI, Owners are
permitted to exchange their Vacation Credits for vacation use among the resorts
which participate in the RCI network. However, no assurance can be given that
the Company will continue to be able to ensure that Owners will be eligible to
participate in the RCI network or that the weekly RCI exchange value for
Vacation Credits will not become less favorable to Owners. Moreover, if the RCI
exchange network ceases to function effectively, or if Vacation Credits are not
accepted as exchanges for other desirable resorts, the Company's sales of
Vacation Credits could be materially adversely affected. See
"Business -- Participation in Vacation Interval Exchange Network."
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various federal, state, local and foreign laws, ordinances and
regulations, the owner or operator of real property generally is liable for the
costs of removal or remediation of certain hazardous or toxic substances located
on or in, or emanating from, such property, as well as related costs of
investigation and property damage. Such laws often impose such liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Other federal and state laws
require the removal or encapsulation of asbestos-containing material when such
material is in poor condition or in the event of construction, demolition,
remodeling or renovation. Other statutes may require the removal of underground
storage tanks. Noncompliance with these and other environmental, health or
safety requirements may result in the need to cease or alter operations at a
property. Although the Company conducts an environmental assessment with respect
to the properties it acquires for WorldMark, the Company has not received a
Phase I environmental report for any WorldMark Resort. There can be no assurance
that any environmental assessments undertaken by the Company with respect to the
WorldMark Resorts have revealed all potential environmental liabilities, or that
an environmental condition does not otherwise exist as to any one or more of the
WorldMark Resorts that could have a material adverse effect on the Company's
business, financial condition and results of operations.
NATURAL DISASTERS; UNINSURED LOSS
WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from
earthquakes, floods or acts of war, are generally excluded from WorldMark's
insurance coverage. Should an uninsured loss or loss in excess of insured limits
occur, WorldMark has the option to either (i) remove such
14
<PAGE> 16
units from the Vacation Credit system, which would result in a proportionate
dilution of vacation time available for the Vacation Credits which have been
sold, or (ii) pay the related costs of replacement. Although WorldMark's board
of directors may impose a limited amount of special assessments to pay for
capital improvements or major repairs, there can be no assurance that WorldMark
would be able to increase assessments to provide sufficient funds to pay for all
possible capital improvements and major repairs of the units at the WorldMark
Resorts. In such an event, the Company may need to advance funds to WorldMark in
order to maintain the quality of the WorldMark Resorts or WorldMark may be
required to defer certain improvements or repairs. See "Business -- Insurance;
Legal Proceedings."
EFFECTIVE VOTING CONTROL BY EXISTING STOCKHOLDER; ANTITAKEOVER PROVISIONS
Upon closing of the Offering, Jeld-Wen will own % of the
outstanding shares of Common Stock. This concentration of ownership will give
Jeld-Wen control of the election of directors and the management and affairs of
the Company and sufficient voting power to determine the outcome of all matters
submitted to the stockholders for approval, including mergers, consolidations
and the sale of all, or substantially all, of the Company's assets. In addition,
certain provisions of Oregon law and of the Company's Amended and Restated
Articles of Incorporation and Amended and Restated Bylaws could have the effect
of making it more difficult or more expensive for a third party to acquire, or
of discouraging a third party from attempting to acquire, control of the
Company. In addition, the Company is authorized to issue Preferred Stock with
rights senior to, and that may adversely affect, the Common Stock, with such
rights, preferences and privileges as the Company's Board of Directors may
determine, without the necessity of stockholder approval. The Company, however,
has no present plans to issue any shares of Preferred Stock. See "Principal and
Selling Stockholders," "Description of Capital Stock" and "Certain Provisions of
Oregon Law and of Trendwest's Articles of Incorporation and Bylaws."
SHARES ELIGIBLE FOR FUTURE SALE
Upon closing of the Offering, all of the shares of Common Stock offered
hereby will be eligible for public sale without restriction. Holders of the
other shares of Common Stock hold their shares subject to the
limitations of Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act"). All holders of these shares have entered into lock-up
agreements with the Underwriters not to offer, sell or otherwise dispose of any
equity securities of the Company for 180 days after the date of this Prospectus
without the prior written consent of Montgomery Securities. Montgomery
Securities may, in its sole discretion, at any time without notice, release all
or any portion of the shares subject to the lock-up agreements during this 180
day period. Future sales of substantial amounts of Common Stock, or the
potential for such sales, could adversely affect prevailing market prices. See
"Shares Eligible for Future Sale" and "Underwriting."
IMMEDIATE AND SUBSTANTIAL DILUTION; NO ANTICIPATED DIVIDENDS
Purchasers of Common Stock in the Offering will experience immediate
dilution in pro forma net tangible book value per share of Common Stock of
$ from the initial public offering price per share (assuming an initial
public offering price of $ per share). See "Dilution." In addition, the
Company does not anticipate that it will pay any cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no prior public market for the Company's Common Stock.
Although application has been made to list the Common Stock for quotation on the
Nasdaq National Market, there can be no assurance that a viable public market
for the Common Stock will develop or be sustained after the Offering or that
purchasers of the Common Stock will be able to resell their Common Stock at
prices equal to or greater than the initial public offering price. The initial
public offering price will be determined by negotiations among the Company, the
Selling Stockholder and the representatives of the Underwriters and may not be
indicative of the prices that may prevail in the public market after the
Offering is completed. Numerous factors, including announcements of fluctuations
in the Company's or its competitors' operating results and market conditions
15
<PAGE> 17
for hospitality and timeshare industry stocks in general, could have a
significant impact on the future price of the Common Stock. In addition, the
stock market in recent years has experienced significant price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many growth companies, and have often been unrelated or
disproportionate to the operating performance of these specific companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
See "Underwriting."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby at an estimated initial public
offering price of $ per share, after deducting the underwriting
discount and estimated expenses of the Offering, are estimated to be $34.9
million ($40.5 million if the Underwriters' over-allotment option is exercised
in full). The Company intends to use approximately $22.8 million of the
estimated net proceeds to repay all of the outstanding indebtedness and accrued
interest owed to Jeld-Wen. The balance of the net proceeds of approximately
$14.2 million will be used for working capital and general corporate purposes,
including the acquisition and development of additional resort properties. See
"Summary -- The WorldMark Resorts" and "Business -- Growth Strategy" for a
discussion of the projects which are currently under development or subject to
acquisition agreements. Pending application as described above, the net proceeds
to the Company will be invested in short-term, investment grade, interest
bearing securities.
Indebtedness to be repaid out of the net proceeds from the Offering bears
interest at the prime rate plus 1% (currently 9.50%) per annum and is payable on
demand. Indebtedness to be repaid that was incurred within the last year was
incurred for the acquisition and development of timeshare resorts and for
general corporate purposes.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholder.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock and does not anticipate paying cash dividends on its Common Stock in the
foreseeable future. The Company currently intends to retain future earnings to
finance its operations and fund the growth of its business. Any payment of
future dividends will be at the discretion of the Board of Directors of the
Company and will depend upon, among other things, the Company's earnings,
financial condition, capital requirements, level of indebtedness, contractual
restrictions in respect of the payment of dividends and other factors that the
Company's Board of Directors deems relevant.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth, as of December 31, 1996, the debt and total
capitalization of the Company on an actual basis and as adjusted to give effect
to the sale of Common Stock offered by the Company at an assumed initial public
offering price of $ per share and the application of the estimated net
proceeds to the Company therefrom. This table should be read in conjunction with
the historical financial statements of the Company and the related notes thereto
included elsewhere in this Prospectus. See "Use of Proceeds" and "Selected
Combined Financial and Operating Data."
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1996
----------------------
AS
ACTUAL ADJUSTED
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt:
Notes payable......................................... $ 1,055 $ 1,055
Due to parent company................................. 21,316 --
------- -------
Total debt(1)................................. 22,371 1,055
Stockholders' equity:
Preferred Stock, no par value; 10,000,000 shares
authorized; no shares issued and outstanding....... -- --
------- -------
Common Stock, no par value; 90,000,000 shares
authorized; shares issued and outstanding;
shares issued and outstanding as
adjusted(2)........................................ 14,970 49,826
Retained earnings..................................... 34,774 34,774
------- -------
Total stockholders' equity............................ 49,744 84,600
------- -------
Total capitalization.......................... $72,115 $85,655
======= =======
</TABLE>
- ---------------
(1) See Notes 6 and 9 of Notes to Combined Financial Statements.
(2) Does not include shares of Common Stock authorized for issuance under the
Company's stock option plan. See "Management -- 1997 Stock Option Plan."
17
<PAGE> 19
DILUTION
The pro forma net tangible book value of the Company at December 31, 1996
was approximately $49.7 million, or $ per share of Common Stock. Pro
forma net tangible book value per share represents the Company's total tangible
assets less its total liabilities, divided by the total number of outstanding
shares of Common Stock after giving effect to the Consolidation Transactions.
After giving effect to the sale of shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds therefrom, the pro forma
net tangible book value of the Company at December 31, 1996 would have been
approximately $86.8 million or $ per share of Common Stock. This
represents an immediate increase in such pro forma net tangible book value of
$ per share to the existing stockholders of the Company and an
immediate dilution in pro forma net tangible book value of $ per share
to purchasers of Common Stock in the Offering. The following table illustrates
this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........... $
-------
Pro forma net tangible book value per share before the
Offering............................................. $
-------
Increase per share attributable to new investors........
-------
Pro forma net tangible book value per share after the
Offering................................................
-------
Dilution per share to new investors....................... $
=======
</TABLE>
The following table sets forth, as of December 31, 1996, the number of
shares of Common Stock purchased, the total consideration paid therefor and the
average price paid per share by the existing stockholders of the Company and the
purchasers of Common Stock in the Offering, at an assumed initial public
offering price of $ per share (before deducting the estimated
underwriting discount and offering expenses payable by the Company). The
following table does not include shares of Common Stock which the
Underwriters may purchase pursuant to their over-allotment option. See
"Underwriting."
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)....... 14,700,000
New investors(2)...............
------ ----- ----------- -----
Total................ 100.0% $ 100.0%
====== ===== =========== =====
</TABLE>
- ---------------
(1) Sales of Common Stock by the Selling Stockholder in the Offering will cause
the number of shares of Common Stock held by the existing stockholders to be
reduced to shares, or % of the total number of shares of
Common Stock to be outstanding after the Offering, and will increase the
number of shares of Common Stock held by new investors to shares,
or % of the total number of shares to be outstanding after the
Offering. See "Principal and Selling Stockholders."
(2) Purchasers of Common Stock in the Offering.
18
<PAGE> 20
SELECTED COMBINED FINANCIAL AND OPERATING DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The selected data presented below under the captions "Statement of
Operations Data" and "Balance Sheet Data" as of December 31, 1995 and 1996 and
for each of the years in the three-year period ended December 31, 1996 are
derived from the combined financial statements of Trendwest Resorts, Inc. and
certain affiliates, which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. Such combined financial
statements and the report thereon are included elsewhere in this Prospectus. The
information as of December 31, 1994 and 1993 and for the year ended December 31,
1993 has been derived from the financial statements of Trendwest Resorts, Inc.
and the financial statements of TW Holdings, Inc., which have been audited by a
predecessor auditor as adjusted for certain prior period adjustments. The
information as of and for the year ended December 31, 1992 has been derived from
the financial statements of Trendwest Resorts, Inc., which have been audited by
a predecessor auditor as adjusted for certain prior period adjustments. The
information set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the combined financial information for the Company and the notes thereto which
are contained elsewhere herein. The information presented below under the
captions "Pro Forma Data" and "Operating Data" is unaudited.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Vacation Credit sales, net................................... $35,798 $38,743 $54,904 $77,783 $100,040
Finance income............................................... 3,069 3,813 3,736 5,368 7,143
Gains on sales of notes receivable........................... -- 1,558 1,635 3,222 5,673
Resort management services................................... 219 1,102 2,805 1,579 1,501
Other........................................................ 241 344 763 1,226 2,552
------- ------- ------- ------- -------
Total revenues......................................... 39,327 45,560 63,843 89,178 116,909
Costs and operating expenses:
Vacation Credit cost of sales................................ 9,083 8,743 15,070 20,484 27,400
Resort management services................................... 301 959 2,613 1,283 859
Sales and marketing.......................................... 17,954 19,523 25,615 36,374 47,810
General and administrative................................... 3,253 4,056 6,588 8,391 10,904
Provision for doubtful accounts and recourse liability....... 2,031 2,805 4,537 6,522 7,467
Interest..................................................... 2,457 1,929 881 2,380 2,445
------- ------- ------- ------- -------
Total costs and operating expenses..................... 35,079 38,015 55,304 75,434 96,885
------- ------- ------- ------- -------
Income before income taxes..................................... 4,248 7,545 8,539 13,744 20,024
Income tax expense........................................... 1,542 2,909 3,214 4,979 7,348
------- ------- ------- ------- -------
Net income..................................................... $ 2,706 $ 4,636 $ 5,325 $ 8,765 $ 12,676
======= ======= ======= ======= =======
PRO FORMA DATA:
Pro forma net income(1)........................................ $ 14,281
Pro forma net income per share of Common Stock(1)..............
Pro forma weighted average shares of Common Stock
outstanding..................................................
EBITDA(2)...................................................... $ 6,881 $ 9,759 $10,605 $17,935 $ 25,706
OPERATING DATA:
Number of WorldMark Resorts (at end of period)................. 11 12 14 16 18
Number of units (at end of period)............................. 147 239 325 499 746
Number of Vacation Credits sold (in thousands)................. 32,761 34,335 47,181 64,503 80,248
Average price per Vacation Credit sold......................... $ 1.09 $ 1.13 $ 1.16 $ 1.21 $ 1.25
Average cost per Vacation Credit sold.......................... $ 0.28 $ 0.26 $ 0.32 $ 0.32 $ 0.34
Number of Owners (at end of period)............................ 8,252 12,732 18,740 27,965 38,997
Average purchase price for new Owners.......................... $ 7,909 $ 8,190 $ 8,244 $ 8,460 $ 8,609
BALANCE SHEET DATA:
Cash, including restricted cash................................ $ 758 $ 528 $ 375 $ 516 $ 802
Total assets................................................... 26,624 35,995 50,021 68,807 84,659
Indebtedness(3)................................................ 18,254 4,809 10,378 24,826 22,371
Stockholders' equity........................................... 5,412 22,308 27,456 36,753 49,744
</TABLE>
- ---------------
(1) Reflects the issuance of shares of Common Stock offered by the
Company hereby, the retirement of $21.3 million of debt and the elimination
of interest expense related to the retirement of $21.3 million of debt.
19
<PAGE> 21
(2) As shown below, EBITDA represents net income before interest expense, income
taxes, depreciation and amortization. EBITDA does not represent cash flows
from operations and should not be considered to be an alternative to net
income as an indicator of operating performance or as an alternative to cash
flows from operations as a measure of liquidity. In addition, the Company's
presentation of EBITDA could differ from similar presentations prepared by
other companies. Management believes that EBITDA represents a useful measure
to evaluate the Company's results of operations, without reference to its
capitalization and tax structure. Management also believes EBITDA is a
useful indicator of the Company's ability to service and/or incur
indebtedness because it adjusts net income for non-cash expenditures, taxes
and existing interest expenses. The following table reconciles EBITDA to net
income:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net income........................................ $2,706 $4,636 $ 5,325 $ 8,765 $12,676
Interest expense.................................. 2,457 1,929 881 2,380 2,445
Taxes............................................. 1,542 2,909 3,214 4,979 7,348
Depreciation...................................... 176 285 302 330 502
Amortization of excess servicing asset............ -- -- 883 1,481 2,735
------ ------ ------- ------- -------
EBITDA............................................ $6,881 $9,759 $10,605 $17,935 $25,706
====== ====== ======= ======= =======
</TABLE>
(3) Indebtedness is comprised of notes payable to Jeld-Wen and others.
20
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Trendwest markets, sells and finances timeshare ownership interests in the
form of Vacation Credits and acquires, develops and manages the WorldMark
Resorts. The Company derives revenues primarily from the sale of Vacation
Credits and, to a lesser extent, from the financing of Vacation Credits and from
management fees generated from its management agreement with WorldMark.
Vacation Credits sales are recognized on the accrual basis after the
Company has received an executed sales contract and a minimum 10% down payment,
and the rescission period (generally three to seven days) has passed. The
Company acquires or develops additional resort units for WorldMark and
contributes those units to WorldMark free of monetary encumbrances, thereby
creating additional Vacation Credits for sale by the Company. The Company
assigns each WorldMark Resort unit a specific number of Vacation Credits based
on its vacation use value relative to existing WorldMark Resort units.
Acquisition and construction costs associated with the WorldMark Resort units
are recorded as inventory. Vacation Credit cost of sales are allocated as
Vacation Credit sales are recognized.
Financing of Vacation Credits is provided to Owners by Trendwest at an
interest rate of 13.9% or 14.9% per annum for a term of up to seven years. The
Company routinely sells Notes Receivable to financial institutions and other
investors to generate liquidity to acquire or develop new resort units and for
working capital. The Company recognizes a gain on the sale of Notes Receivable
at the time of sale equal to the present value of the estimated net future cash
flow of the payment streams. This gain is recorded as an excess servicing asset
on the Company's balance sheet and is amortized over the term of the Notes
Receivable using the interest method.
RESULTS OF OPERATIONS
The following discussion of the results of operations relates to entities
comprising the Company on a combined historical basis. The following table sets
forth certain operating information for the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
AS A PERCENTAGE OF TOTAL REVENUES:
Vacation Credit sales, net.................................... 86.0% 87.2% 85.5%
Finance income................................................ 5.8 6.0 6.1
Gains on sales of notes receivable............................ 2.6 3.6 4.9
Resort management services.................................... 4.4 1.8 1.3
Other......................................................... 1.2 1.4 2.2
----- ----- -----
100.0% 100.0% 100.0%
===== ===== =====
AS A PERCENTAGE OF VACATION CREDIT SALES, NET:
Vacation Credit cost of sales................................. 27.4% 26.3% 27.4%
Sales and marketing........................................... 46.7 46.8 47.8
Provision for doubtful accounts and recourse liability........ 8.3 8.4 7.5
AS A PERCENTAGE OF RESORT MANAGEMENT REVENUES:
Cost of resort management services............................ 93.2 81.3 57.2
AS A PERCENTAGE OF TOTAL REVENUES:
General and administrative.................................... 10.3 9.4 9.3
Total costs and operating expenses............................ 86.6 84.6 82.9
</TABLE>
21
<PAGE> 23
Comparison of the year ended December 31, 1996 to the year ended December 31,
1995
For 1996, the Company achieved total revenue of $116.9 million compared to
$89.2 million for 1995, an increase of 31.1%. This increase was primarily due to
a 28.5% increase in Vacation Credit sales, from $77.8 million to $100.0 million,
and a 31.5% increase in finance income, from $5.4 million to $7.1 million. This
increase in Vacation Credit sales was primarily the result of a 24.3% increase
in the number of Vacation Credits sold from 64.5 million in 1995 to 80.2 million
in 1996 due to the opening of two new off-site sales offices (one in May 1995
and one in April 1996) and three new on-site sales offices (one in April 1995,
one in June 1995 and one in February 1996). Upgrade Sales increased from $8.3
million for 1995 to $15.6 million for 1996, due to the increased number of
Owners and more effective sales programs. The average price per Vacation Credit
sold increased slightly from $1.21 for 1995 to $1.25 for 1996, an increase of
3.3%. The increase in finance income was primarily due to increased carrying
balances of Notes Receivable related to higher Vacation Credit sales in 1996
compared to 1995. Gains on sales of Notes Receivable increased 78.1% from $3.2
million for 1995 to $5.7 million for 1996. This increase was due to a greater
amount of Notes Receivable sales, which increased from $38.5 million for 1995 to
$72.2 million for 1996.
Vacation Credit cost of sales increased from $20.5 million for 1995 to
$27.4 million for 1996, an increase of 33.7%, primarily reflecting the increase
in sales of Vacation Credits. As a percentage of Vacation Credit sales, Vacation
Credit cost of sales increased to 27.4% in 1996 from 26.3% in 1995. This
increase was due to the relatively higher cost of developing and constructing
the Gleneden Beach resort in Oregon compared to other WorldMark Resorts and the
reduction of revenue resulting from an increase in net deferred gross profit on
Upgrade Sales.
Cost of resort management services decreased 30.8% from $1.3 million in
1995 to $0.9 million in 1996, primarily as a result of the shift in the
management responsibility for WorldMark's resort level operations from Trendwest
to WorldMark which occurred in the second quarter of 1995.
For 1996, sales and marketing costs increased 31.3% from $36.4 million in
1995 to $47.8 million in 1996. As a percentage of Vacation Credit sales, sales
and marketing costs increased slightly from 46.8% in 1995 to 47.8% in 1996. The
growth in sales and marketing costs reflects the increase in Vacation Credit
sales and the opening of two new sales offices.
General and administrative expenses increased 29.8% from $8.4 million in
1995 to $10.9 million in 1996, primarily reflecting the growth in the overall
business of Trendwest. General and administrative expenses decreased as a
percentage of total revenues from 9.4% in 1995 to 9.3% in 1996, primarily
reflecting the realization of certain economies of scale causing administrative
expenses to increase at a lower rate than total revenues.
Interest expense remained consistent at $2.4 million, as lower average
interest rates offset the effect of somewhat higher average loan balances.
Provision for doubtful accounts and recourse liability increased 15.4% from
$6.5 million in 1995 to $7.5 million in 1996. As a percentage of Vacation Credit
sales, the provision declined from 8.4% in 1995 to 7.5% in 1996. Reserve
strengthening contributed to the higher percentage in 1995 and a higher
percentage of the Company's Notes Receivable being held by Upgrade Owners at the
end of 1996 contributed to the lower percentage in 1996.
Comparison of the year ended December 31, 1995 to the year ended December 31,
1994
For the year ended December 31, 1995, the Company achieved total revenues
of $89.2 million compared to $63.8 million for 1994, an increase of 39.8%. This
increase was primarily due to a 41.7% increase in Vacation Credit sales, from
$54.9 million in 1994 to $77.8 million in 1995, a 45.9% increase in finance
income, from $3.7 million in 1994 to $5.4 million in 1995, and a 100.0% increase
in gains on sales of Notes Receivable, from $1.6 million in 1994 to $3.2 million
in 1995. These increases were partially offset by a decrease in resort
management service revenues from $2.8 million in 1994 to $1.6 million in 1995.
The increase in Vacation Credit sales was primarily the result of a 36.7%
increase in the number of Vacation Credits sold from 47.2 million in 1994 to
64.5 million in 1995, primarily due to the addition of one new off-site sales
office (in
22
<PAGE> 24
May 1995) and three new on-site sales offices (one in September 1994, one in
April 1995 and one in June 1995). In addition, the growth in Upgrade Sales
contributed to the increase in Vacation Credit sales. The average price per
Vacation Credit sold in 1995 increased 4.3% from $1.16 in 1994 to $1.21 in 1995.
Finance income increased as a result of a higher average balance of Notes
Receivable outstanding due to financing associated with the increased Vacation
Credit sales. Gains on sales of notes receivable increased from $1.6 million in
1994 to $3.2 million in 1995 reflecting the increase in the amount of Notes
Receivable sold from $23.9 million in 1994 to $38.6 million in 1995 and improved
interest rate spread on the Notes Receivable sold. The decrease in resort
management service revenues was attributable to the shift in Worldmark's
resort-level operations from Trendwest to WorldMark which occurred in the second
quarter of 1995.
Vacation Credit cost of sales increased 35.8% from $15.1 million in 1994 to
$20.5 million in 1995. The increase in Vacation Credit costs of sales reflects
the increase in the number of Vacation Credits sold in 1995. As a percentage of
Vacation Credit sales, Vacation Credit cost of sales declined from 27.4% in 1994
to 26.3% in 1995 due to favorable product costs and economies of scale
associated with developing and acquiring larger projects.
Cost of resort management services decreased 50.0% from $2.6 million in
1995 to $1.3 million in 1994, primarily as a result of the shift in the
management responsibility for WorldMark's resort-level operations from Trendwest
to WorldMark.
Sales and marketing costs increased 42.2% from $25.6 million in 1994 to
$36.4 million in 1995, primarily as a result of increased Vacation Credit sales.
As a percentage of Vacation Credit sales, sales and marketing costs increased
from 46.7% in 1994 to 46.8% in 1995, primarily as a result of the increased
costs associated with opening the three new sales offices in 1995.
General and administrative expenses increased 27.3% from $6.6 million in
1994 to $8.4 million in 1995, reflecting the growth in the overall business of
Trendwest. General and administrative expenses decreased as a percentage of
total revenues from 10.3% in 1994 to 9.4% in 1995, reflecting the realization of
certain economies of scale causing a lower rate of growth in administrative
expenses compared to the increase in total revenues.
Interest expense increased from $0.9 million in 1994 to $2.4 million in
1995. The increase in interest expense reflects the higher average loan balance
associated with carrying a higher average Notes Receivable balance.
Provision for doubtful accounts and recourse liability increased 44.4% from
$4.5 million in 1994 to $6.5 million in 1995 reflecting the increase in Vacation
Credit sales. As a percentage of Vacation Credit sales, provision for doubtful
accounts and recourse liability increased from 8.3% in 1994 to 8.4% in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash from operations from down payments on sales of
Vacation Credits which are financed, cash sales of Vacation Credits, principal
and interest on Notes Receivable, and proceeds from sales and borrowings
collateralized by Notes Receivable. The Company also generates cash on the
interest differential between the interest charged on the Notes Receivable and
the interest paid on loans collateralized by Notes Receivable.
During the years ended December 31, 1994, 1995 and 1996, cash flow provided
by (used in) operating activities was ($11.6) million, ($14.2) million and $3.5
million, respectively. For 1996, cash flows from operating activities resulted
primarily from the sale of Notes Receivable, net of repayments, of $88.6 million
and net income of $12.7 million. Cash flow used in operating activities was
principally for issuance of Notes Receivable to finance the purchase of Vacation
Credits by Owners and to increase inventory levels by $5.7 million due to the
increasing sales of Vacation Credits. In 1994 and 1995, the cash flow used in
operating activities was primarily the result of issuance of Notes Receivable of
$50.3 million and $71.1 million, respectively, partially offset by cash received
from the sale and repayment of Notes Receivable of $42.9 million and $57.7
million, respectively, and net income of $5.3 million and $8.8 million,
respectively.
23
<PAGE> 25
Net cash used in investing activities for the years ended December 31,
1994, 1995 and 1996 was $0.2 million, $0.1 million and $1.4 million,
respectively. Cash used in the acquisition of property, plant and equipment is
primarily used to acquire office furniture and fixtures and data processing
equipment for the continued growth of the Company. In 1995, cash of $4.2 million
was provided from the sale of marketable equitable securities.
Net cash provided by (used in) financing activities for the years ended
December 31, 1994, 1995 and 1996 was $11.5 million, $14.4 million and ($2.1)
million, respectively. Net cash provided by (used in) financing activities
primarily relates to net loan repayments or borrowings from Jeld-Wen.
Since completed units at various resort properties are acquired or
developed in advance and a significant portion of the purchase price of Vacation
Credits is financed by the Company, the Company continually needs funds to
acquire and develop property, to carry Notes Receivable contracts and to provide
working capital. The Company has historically secured additional funds through
loans from Jeld-Wen and the sale of Notes Receivable through the Finance
Subsidiaries. As of December 31, 1996, the outstanding indebtedness to Jeld-Wen
was $21.3 million, and the income taxes payable to Jeld-Wen was $2.1 million.
Upon consummation of the Offering, the Company intends to repay the indebtedness
to Jeld-Wen. See "Risk Factors -- Dependence on Acquisitions of Additional
Resort Units for Growth; Need for Additional Capital."
Financing of Notes Receivable has been accomplished by use of a $68.0
million purchase commitment from a group of banks led by Seattle-First National
Bank (the "Bank Group"). As of December 31, 1996, Notes Receivable totaling
$55.0 million had been purchased by the Bank Group. The Notes Receivable
purchased by the Bank Group are collateralized by a pool of Notes Receivable
equal to 25% of the amount purchased by the Bank Group. Interest rates under the
line of credit with the Bank Group are at 30 day, 60 day, 90 day, or 180 day
LIBOR plus 150 basis points. The Company has purchased a three year, 30-day
LIBOR interest rate cap at 10.125% per annum on $31.8 million. The interest rate
cap expires on April 10, 1998. The agreement with the Bank Group is subject to
annual renewal on June 30 of each year with the next renewal scheduled for June
30, 1997. Management intends to seek an increase in the size of this facility to
$100.0 million and presently has commitments for $88.0 million. In the future,
the Company may hypothecate its Notes Receivable.
Through the end of 1998, the Company anticipates spending approximately
$68.0 million for acquisitions and development of new resort properties and for
expansion and development activities at the existing WorldMark Resorts. The
Company plans to fund these expenditures with the net proceeds of the Offering
(after reduction of debt) and cash generated from operations, including further
sales or securitizations of Notes Receivable. The Company believes that, with
respect to its current operations, the net proceeds to the Company from the
Offering, together with cash generated from operations and future borrowings,
will be sufficient to meet the Company's working capital and capital expenditure
needs through the end of 1998.
In the future, the Company may negotiate additional credit facilities, or
issue corporate debt or equity securities. Any debt incurred or issued by the
Company may be secured or unsecured, at a fixed or variable rate interest, and
may be subject to such additional terms as management deems reasonable.
24
<PAGE> 26
BUSINESS
OVERVIEW
Trendwest Resorts, Inc. markets, sells and finances timeshare Vacation
Ownership Interests and acquires, develops and manages timeshare resorts. In
1996, Trendwest was ranked as one of the largest timeshare companies in the
United States, according to published sales volume data in the Vacation
Ownership World trade magazine. The Company's timeshare resorts are owned by and
operated through WorldMark, a non-profit mutual benefit corporation organized by
Trendwest in 1989 to provide an innovative, flexible vacation ownership system.
As of March 31, 1997, WorldMark had in excess of 41,000 Owners and owned and
maintained an aggregate of 800 condominium-style units at 19 WorldMark Resorts
in the western United States, Hawaii, British Columbia and Mexico. The Company
presently sells Vacation Ownership Interests in Washington, Oregon and
California, primarily through eight off-site sales offices.
Trendwest sells Vacation Ownership Interests in the form of Vacation
Credits which are created by the contribution to WorldMark of resort units
purchased or developed by the Company. Vacation Credits can be used by Owners to
reserve units at any of the WorldMark Resorts, at any time during the year and
in time increments as short as one day. The use of Vacation Credits is not tied
to any particular resort unit or time period as is typical in the timeshare
industry. The Company believes that the combination of multiple WorldMark
Resorts and the Company's Vacation Credit system provides Owners with an
attractive range of vacation planning choices and values not generally available
within the timeshare industry. The Company's Vacation Credit system with
multiple WorldMark Resorts facilitates the sale of Vacation Credits at off-site
sales offices located in major metropolitan areas and reduces dependence on
on-site sales centers located at more remote resort locations.
The Company sells Vacation Credits at its 11 sales offices, eight of which
are located off-site in metropolitan areas. The other sales offices are located
on-site at three of the WorldMark Resorts. The Company intends to establish an
additional off-site sales office in California in late 1997. The Company
contributed 224 resort units to WorldMark in 1996, 146 resort units in 1995 and
86 resort units in 1994. Revenues from Vacation Credit sales increased to
approximately $100.0 million in 1996 from $77.8 million in 1995 and
approximately $54.9 million in 1994. The Company contributed 48 resort units to
WorldMark during the first quarter of 1997. As of March 31, 1997, the Company
had purchase agreements and developments in progress to obtain an additional 364
resort units during the remainder of 1997 and 1998, of which 163 units are
expected to be available in 1997, and the remaining 201 resort units are
expected to be available during 1998.
OPERATING STRATEGY
The Company believes its operating strategy and vacation ownership system
provide the following advantages over other timeshare companies:
- Vacation Flexibility. The Company's Vacation Credit system allows Owners
access to multiple WorldMark Resorts, permitting them to tailor their
vacation according to their schedules, desired vacation length, location
preferences and space requirements. The 19 WorldMark Resort locations
provide access to a variety of vacation experiences, from skiing to golf,
and a variety of settings, from beaches to mountains. Vacation time is
reserved on a first come, first served basis. In 1996, based on information
provided by Owner comment cards, the Company believes that approximately
73% of Owners received their first choice of resort location when reserving
vacation time. To enhance Owner usage and facilitate weekend stays and
stays shorter than one week, the Company purchases and develops a large
percentage of WorldMark Resort units within a reasonable driving distance
of the Company's primary metropolitan sales markets.
- Appeal to Broad Consumer Base. The Company believes its Vacation Credit
system enables it to market effectively to potential customers with a
broader range of income levels and vacation requirements than is addressed
by most timeshare companies. The Company provides prospective purchasers
with the opportunity to purchase varying increments of Vacation Credits
suitable for their financial position and vacation needs. The Company's
minimum purchase requirement of 6,000 Vacation Credits, which
25
<PAGE> 27
presently costs $7,800, makes entry into WorldMark affordable for a
significant number of households. The Company also markets Upgrades to
existing Owners in smaller increments, which accounted for approximately
13% of Vacation Credit sales in 1996.
- Marketing Through Off-Site Sales Offices. The Company's Vacation Credit
system facilitates marketing Vacation Ownership Interests effectively at
off-site sales offices. The Company believes the use of off-site sales
offices enables it to attract a larger number of prospective purchasers to
sales presentations than at sales offices at more remote resort locations.
In addition, the location of sales offices in metropolitan areas provides
the Company with the flexibility to establish sales offices in the most
demographically attractive areas within a geographic market and to relocate
sales offices quickly at a modest cost when conditions warrant.
- Inventory Control. The Company's sale of Vacation Credits rather than
deeded interests with weekly intervals at individual resorts enables it to
schedule its resort acquisition and development activities in accordance
with its anticipated sales volumes and to diversify the risk of its capital
commitments among several resorts. Since all Vacation Credits have the same
use rights and sell for the same price, the Company does not experience a
buildup of inventory of less desirable resort units or interval dates which
are difficult to sell. The Company can also develop resorts at desirable
remote locations since it does not depend on on-site sales offices to
generate sales.
- Owner Satisfaction. The Company places great importance on Owner
satisfaction. The Company believes that Owner satisfaction is achieved by
maintaining a high level of quality at the WorldMark Resorts, by increasing
the number of resort locations and by satisfying Owners' first vacation
requests a high percentage of the time. Of the 19 WorldMark Resorts, 12
have the highest rating from Resort Condominiums International Inc.
("RCI"), the world's largest timeshare exchange network, four have the
second-highest rating from RCI and three have been recently opened and have
not yet been rated. The Company has increased the number of WorldMark
Resorts from three in 1989 to its present 19 and intends to add two
additional WorldMark Resorts during the remainder of 1997 and two
additional WorldMark Resorts in 1998. Although Owners have exchange
privileges through the RCI network, the Company believes that Owner
satisfaction with the WorldMark Resorts is demonstrated by the Owners'
usage of approximately 74% of their Vacation Credits at WorldMark Resorts
in 1996. The satisfaction of existing Owners with WorldMark and the
WorldMark Resorts generates additional revenues to the Company through
Upgrade Sales and from Owner referrals of new prospects.
GROWTH STRATEGY
The Company's growth strategy is to (i) expand existing WorldMark Resorts
and acquire and develop additional resorts primarily in the western United
States, Hawaii, British Columbia and Mexico to provide additional Vacation
Credits for sale by the Company and a wider range of WorldMark Resorts for use
by Owners; (ii) increase sales and financings of Vacation Credits to new
customers by expanding sales and marketing efforts, including opening additional
off-site sales offices; and (iii) increase Upgrade Sales by establishing and
maintaining long-term relationships with Owners through effective customer
service programs and innovative benefit programs and discount packages.
Acquisition and Development of Additional Resorts. The Company acquires and
develops additional resort units for WorldMark, thereby providing additional
Vacation Credits for sale by the Company and a greater variety of resort
locations for the Owners. The Company acquires and develops properties in
attractive vacation areas that are either within a reasonable driving distance
(generally two to five hours) from an off-site sales office or are easily
accessible by air travel. The Company's goal is to obtain a mix of resort
locations that can accommodate purchasers of approximately 70% of the Vacation
Credits sold in a particular geographic market within a reasonable driving
distance of that market. The Company intends to acquire new resort locations in
the western United States (west of the Rocky Mountains) and in Hawaii, British
Columbia and Mexico. The Company seeks properties that have on-site resort
amenities, or are located close to such amenities, such as ski lifts, golf
courses, tennis courts, swimming pools, rivers, lakes and beaches. As of March
31, 1997, the Company had an existing inventory of 24.3 million Vacation Credits
and had purchase
26
<PAGE> 28
agreements and developments in progress to add 163 units that are expected to be
available during the remainder of 1997, and an additional 201 units that are
expected to be available during 1998. These new units are expected to provide an
aggregate of approximately 167.5 million Vacation Credits.
Sales and Financings of Vacation Credits. The Company plans to increase the
sales and financings of Vacation Credits to new customers primarily through the
opening of additional off-site sales offices. The Company opened a new off-site
sales office in Costa Mesa, California in February 1997 and anticipates opening
an additional off-site sales office in late 1997 in California. While sales at
existing sales offices have generally experienced annual increases, the Company
believes that a substantial portion of its sales growth will come from recently
established and new off-site sales offices. The Company believes that the
success of its owner referral program will also be a significant factor to
increase sales. The Company's owner referral program, where existing Owners
refer prospective new Owners to the Company, was the source for approximately
13% of sales of Vacation Credits during 1996.
Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales of Vacation Credits will continue to be financed by the
Company. In 1996, the Company provided financing for approximately 87% of the
aggregate purchase price of Vacation Credits sold to new Owners. During 1996,
the average new Note Receivable had a principal amount of approximately $7,650,
and the aggregate amount of Notes Receivable generated in connection with the
sale of Vacation Credits to new Owners was approximately $79.1 million. The
Company has sold, and expects in the future to sell, a substantial amount of its
Notes Receivable. See "-- Customer Financing," "-- Finance Subsidiaries" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Sales of Additional Vacation Credits to Existing Owners. The Company places
significant emphasis on Upgrade Sales to existing Owners. Upgrade Sales
accounted for approximately 9% and 13% of the Company's sales of Vacation
Credits during 1995 and 1996, respectively. With an increasing number of Owners,
the Company believes that Upgrade Sales will continue to increase. Since a new
Owner may purchase as few as 6,000 Vacation Credits to become an Owner, Owners
often are interested in purchasing Upgrades in order to expand their ability to
use the WorldMark Resorts. Upgrades are offered in increments of 1,000 Vacation
Credits and generally may be purchased at a discount from the then current
price. Owners have the opportunity to finance the purchase of Upgrades through
the Company. Upgrade Sales to existing Owners provide a higher gross margin to
the Company due to substantially lower sales and marketing costs associated with
such sales. The Company has a segment of its sales and marketing group which
concentrates on Upgrade Sales. See "-- Customer Financing."
THE TIMESHARE INDUSTRY
The Market. The resort component of the leisure industry primarily is
serviced by two separate alternatives for overnight accommodations: commercial
lodging establishments and timeshare or "vacation ownership" resorts. Commercial
lodging consists of hotels, motels, privately owned condominiums and houses
rented on a nightly, weekly or monthly basis. For many vacationers, particularly
those with families, a lengthy stay at a quality commercial lodging
establishment is above the available budget, and the space provided relative to
the cost is not adequate. The Company believes that vacation ownership programs
present an economical alternative to commercial lodging for vacationers.
27
<PAGE> 29
According to ARDA, a nonprofit industry organization, the timeshare
industry experienced a record year in 1994 with 384,000 new owners purchasing
560,000 vacation intervals generating sales of $4.76 billion. First introduced
in Europe in the mid-1960s, ownership of vacation intervals has been one of the
fastest growing segments of the hospitality industry over the past two decades.
As shown in the following charts the worldwide timeshare industry has expanded
significantly since 1980 both in vacation interval sales volume and number of
vacation interval owners.
<TABLE>
<S> <C> <C> <C> <C>
1980 0.49
1981 0.97
1982 1.17
1983 1.34
1984 1.74
1985 1.58
1986 1.61
1987 1.94
1988 2.39
1989 2.97
1990 3.24
1991 3.74
1992 4.25
1993 4.51
1994 4.76
1980 155
1981 220
1982 335
1983 470
1984 620
1985 805
1986 970
1987 1125
1988 1310
1989 1530
1990 1800
1991 2070
1992 2363
1993 2760
1994 3144
</TABLE>
- ---------------
Source: American Resort Development Association, The 1995 Worldwide Timeshare
Industry.
28
<PAGE> 30
The Company believes that, based on published industry data, the following
factors have contributed to the increased acceptance of the timeshare concept
among the general public and the substantial growth of the timeshare industry
over the past 15 years:
- Increased consumer confidence resulting from consumer protection
regulation of the timeshare industry and the entry of brand name national
lodging companies into the industry;
- Increased flexibility of timeshare ownership due to the growth of
exchange organizations such as RCI and Interval International;
- Improvement in the quality of both the facilities themselves and the
management of available timeshare resorts;
- Increased consumer awareness of the value and benefits of timeshare
ownership, including the cost savings relative to other lodging
alternatives; and
- Improved availability of financing for purchasers of vacation intervals.
The timeshare industry traditionally has been highly fragmented and
dominated by a large number of local and regional resort developers and
operators, most with relatively small resort portfolios consisting of units with
differing quality. The Company believes that one of the most significant factors
contributing to the current success of the timeshare industry is the entry into
the market of some of the world's major lodging, hospitality and entertainment
companies. Such major companies which now operate or are developing or
franchising vacation interval resorts include Marriott, Disney, Hilton, Hyatt,
Four Seasons, InterContinental, Westin and Promus. Unlike the Company, however,
the timeshare operations of each of these companies comprise only a relatively
small portion of such company's overall operations. Moreover, brand name lodging
companies are believed by the Company to have had less than 10% of the worldwide
vacation interval market in 1995. The timeshare products offered by most
companies are limited to the use of one resort in weekly intervals and only
provide use of the resort for a fixed period of time. Vacation Credits can be
used by Owners at any WorldMark Resort, at any time during the year and for any
number of days. Unlike the typical requirements imposed by other timeshare
companies, the use of Vacation Credits is not related to any specific resort,
fixed usage period, or time of year. The Company believes that the combination
of its system of Vacation Credits and numerous WorldMark Resorts provides its
customers with a range of vacation choices not offered by any other timeshare
company. See "-- Competition."
The Consumer. According to 1995 information compiled by ARDA, (i) the prime
market for vacation intervals is customers in the 40-55 year age range who are
reaching the peak of their earning power, (ii) the median age of a vacation
interval buyer was 50, and (iii) the median annual household income of vacation
interval owners in the United States was approximately $63,000, with
approximately 35% of all vacation interval owners having an annual household
income greater than $75,000 and approximately 17% of such owners having an
annual household income greater than $100,000. Despite the growth in the
timeshare industry, vacation interval ownership as of December 31, 1994 had
achieved only a 3.0% market penetration among United States households with
income above $35,000 per year and a 3.9% market penetration among United States
households with income above $50,000 per year.
According to the ARDA study, the three primary reasons cited by consumers
for purchasing a vacation interval are (i) the ability to exchange the vacation
interval for accommodations at other resorts through exchange networks such as
RCI (cited by 82% of vacation interval purchasers), (ii) the savings as compared
to traditional resort vacations (cited by 61% of such purchasers), and (iii) the
quality and appeal of the resort at which they purchased a vacation interval
(cited by 54% of such purchasers). According to the ARDA study, vacation
interval buyers have a high rate of repeat purchases. Approximately 41% of all
vacation interval owners own more than one interval representing approximately
65% of the industry inventory, and approximately 51% of all owners who bought
their first vacation interval before 1985 subsequently purchased a second
vacation interval. In addition, the ARDA study suggests that customer
satisfaction increases with length of ownership, age, income, multiple location
ownership and accessibility to vacation interval exchange networks.
29
<PAGE> 31
The Company believes it is well positioned to take advantage of these
trends because its vacation ownership program provides (i) an increasing number
of high quality resorts, (ii) the flexibility to stay at any of the WorldMark
Resorts, (iii) the opportunity to participate in the RCI network, (iv) the
relative affordability of becoming an Owner compared to alternative vacation
interval programs, and (v) an innovative combination of features that provides
Owners with a more flexible timeshare product than those presently offered in
the timeshare industry. The Company expects the timeshare industry to continue
to grow as the baby-boom generation (currently ages 32 to 50) moves through the
40-55 year age bracket, the age group which purchased the most vacation
intervals in 1994.
DESCRIPTION OF THE WORLDMARK RESORTS
The following table sets forth certain information with respect to the
WorldMark Resorts as of March 31, 1997. All of the units are fully-furnished,
including telephones, televisions, VCRs and stereos, and all but the studio
units feature full kitchens. Most of the units contain a washer and dryer,
fireplace, microwave and private outdoor barbecue grill. Many units also include
a private deck.
<TABLE>
<CAPTION>
SIZE OF UNITS(1) WORLDMARK RESORT AMENITIES
------------------------ -----------------------------------------------
SWIMMING WHIRLPOOL/ RESTAURANT/
EXISTING RESORTS LOCATION S 1BR 2BR 3BR TENNIS POOL JACUZZI LOUNGE
- ------------------- ------------------- - --- --- --- ------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BRITISH COLUMBIA
Sundance Whistler 0 10 9 6 X
CALIFORNIA
North Shore
Estates Bass Lake 0 0 61 0 X X X
Beachcomber Pismo Beach 0 20 0 0 X
Palm Springs Palm Springs 10 12 35 7 X X X
Big Bear Big Bear Lake 0 12 0 0
HAWAII
Valley Isle Maui 2 6 6 0 X X
Kapaa Shores Kauai 0 25 17 0 X X X
NEVADA
Lake Tahoe Stateline 0 23 21 6 X X
Las Vegas Las Vegas 0 22 20 0
OREGON
Eagle Crest Redmond 1 28 22 12 X X X X
Gleneden Beach Lincoln City 0 35 41 4 X X X
Running Y Resort Klamath Falls 0 12 13 2 X X X
WASHINGTON
Lake Chelan Shores Chelan 0 5 8 0 X X X
Surfside Long Beach 0 20 5 0 X X
Discovery Bay Sequim 0 0 32 0 X X X X
Park Village Leavenworth 0 0 72 0 X X
Mariner Village Ocean Shores 0 8 24 0 X X
Birch Bay Blaine 0 16 36 0 X X
MEXICO
Coral Baja San Jose del Cabo 0 50 23 1 X X X X
PLANNED RESORTS:
Clear Lake(2) Nice, California
Kona(2) Hawaii, Hawaii
</TABLE>
<TABLE>
<CAPTION>
EXISTING RESORTS NEARBY AMENITIES
- ------------------- ----------------------------
<S> <C>
BRITISH COLUMBIA
Sundance Golf, Skiing
CALIFORNIA
North Shore Water Activities, Yosemite
Estates National Park
Beachcomber Beaches
Palm Springs Golf
Big Bear Skiing, Water Activities
HAWAII
Valley Isle Golf, Beaches
Kapaa Shores Golf, Beaches
NEVADA
Lake Tahoe Skiing, Golf, Water
Activities, Gaming
Las Vegas Gaming, Golf
OREGON
Eagle Crest Golf, Equestrian Center,
Fitness Center
Gleneden Beach Golf, Beaches, Gaming
Running Y Resort Golf, Water Activities
WASHINGTON
Lake Chelan Shores Water Activities
Surfside Beaches
Discovery Bay Water Activities
Park Village Golf, Skiing
Mariner Village Beaches
Birch Bay Beaches, Gaming
MEXICO
Coral Baja Beaches, Golf
PLANNED RESORTS:
Clear Lake(2) Golf, Water Activities
Kona(2) Golf, Beaches
</TABLE>
- ---------------
(1) S indicates studio; 1BR indicates one bedroom; 2BR indicates two bedrooms;
and 3BR indicates three bedrooms. Units with the same number of bedrooms may
vary in size and amenities.
(2) These units are expected to be contributed to WorldMark in 1997 and 1998.
30
<PAGE> 32
In addition to the planned additions of Clear Lake and Kona as WorldMark
Resorts, the Company currently has several other resorts in the permitting stage
and several more in the advanced planning stage. One potential development is
the MountainStar project which initially would involve a 1,100 acre parcel in
central Washington owned by Jeld-Wen. On behalf of Jeld-Wen, the Company is
currently pursuing the necessary regulatory approvals. Should the required
approvals be obtained in a timely manner, active development of this project
could commence as early as the summer of 1998, and the Company anticipates that
it would purchase a portion of the real estate involved in the project and
construct condominium units for its own account and for contribution to
WorldMark. In addition, the Company may be retained by Jeld-Wen to act as
project manager for the overall development of MountainStar.
WORLDMARK
WorldMark is a California nonprofit mutual benefit corporation that was
formed by Trendwest in 1989. WorldMark's articles of incorporation provide that
the specific purpose for which it was formed is to own, operate and manage the
real property conveyed to it by the Company. Owners receive the right to use all
WorldMark Resort units at any available time and interval selected by the Owner,
and the right to vote to elect WorldMark's board members and with respect to
certain major WorldMark matters. The number of votes that each Owner has is
based on the number of Vacation Credits owned.
Compared to other timeshare arrangements, the WorldMark concept provides
Owners significant flexibility in planning vacations. Depending on how many
Vacation Credits an Owner has purchased, the Owner may use the Vacation Credits
for one or more vacations annually. The number of Vacation Credits that are
required to stay one day at WorldMark's units varies, depending upon the resort
location, the size of the unit, the vacation season and the day of the week. For
example, a Friday or Saturday night stay at a one-bedroom unit may require 825
Vacation Credits per night off-season and 1,450 Vacation Credits per night in
peak season. A midweek stay at the same one-bedroom unit would require less
Vacation Credits. This range of Vacation Credits that is required to stay one
day enables an Owner to receive a varying number of days at the WorldMark
Resorts depending on the vacation choices made by the Owner. Under this system,
Owners can select vacations according to their schedules, space needs and
available Vacation Credits. Vacation Credits are reissued on an anniversary date
basis and any unused Vacation Credits may be carried over for one year. An Owner
may also borrow Vacation Credits from the Owner's succeeding year's allotment.
An Owner may also purchase bonus time ("Bonus Time") from WorldMark for use
when space is available. Bonus Time can only be reserved within two weeks of
use. Bonus Time gives Owners the opportunity to use available units on short
notice at a reduced rate (generally from $20 to $50 per night for a two bedroom
unit, mid-week in the off-season) and to obtain usage beyond their Vacation
Credit allotment.
WorldMark collects maintenance dues from Owners based on the number of
Vacation Credits owned. Currently, the annual dues are $237 for the first 5,000
Vacation Credits owned, plus $72 for each additional increment of 2,500 Vacation
Credits owned. These dues are intended to cover WorldMark's operating costs,
including condominium association dues at the WorldMark Resorts. Trendwest pays
WorldMark the dues on all unsold Vacation Credits. Such payments totaled
$137,000, $512,000 and $273,000 in 1994, 1995 and 1996, respectively.
WorldMark has a five member board of directors that manages its business
and affairs. Three of the directors and principal executive officers of
WorldMark are also officers of the Company. The Board must obtain the approval
of a majority of the voting power of the Owners represented (excluding
Trendwest) to take certain actions, including (i) incurrence of capital
expenditures exceeding 5% of WorldMark's budgeted gross expenses during any
fiscal year and (ii) selling property of WorldMark during any fiscal year with
an aggregate fair market value in excess of 5% of WorldMark's budgeted gross
expenses for such year.
Trendwest has a Management Agreement with WorldMark whereby Trendwest acts
as the exclusive manager and servicing agent of WorldMark and the vacation owner
program. Trendwest's responsibilities under the Management Agreement include
general management of WorldMark, overseeing the property management and service
levels of the resorts, and preparing financial forecasts and budgets for
WorldMark. The Management Agreement provides for automatic one-year renewals
unless such renewal is denied by a
31
<PAGE> 33
majority of the voting power of the Owners (excluding Trendwest). As
compensation for its services, Trendwest receives the portion of total revenues
received by WorldMark remaining after WorldMark pays or reserves for its
expenses plus reserves for repair and replacement of WorldMark Resorts. This
amount is subject to a ceiling equal to 15% of the budgeted annual expenses and
reserves of WorldMark (exclusive of Trendwest's fee). Trendwest's management
revenues from WorldMark during 1994, 1995 and 1996 were approximately $173,000,
$747,000 and $1,103,000, respectively.
SALES AND MARKETING
The Company's sales of Vacation Credits primarily occur at eight off-site
sales offices located in metropolitan areas in three regions. The remainder of
the Company's sales of Vacation Credits occur at three on-site sales offices in
these regions. The Company plans to open a new off-site sales office in
California in late 1997. Certain information with respect to the Company's sales
offices in the three regions is provided below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------------------------
1994 1995 1996
-------------------------------------- -------------------------------------- --------------------------------------
(DOLLARS IN THOUSANDS)
AVERAGE NUMBER AVERAGE NUMBER AVERAGE NUMBER
OF SALES NUMBER OF OF SALES NUMBER OF OF SALES NUMBER OF
REGION REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3) REPRESENTATIVES(1) OWNERS(2) SALES(3)
- --------- ------------------ --------- ------- ------------------ --------- ------- ------------------ --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pacific
Northwest(4)... 54 11,367 $31,654 83 17,157 $43,926 104 23,907 $ 54,313
Northern
California(5).. 35 7,297 23,250 60 10,327 31,324 66 13,702 37,287
Southern
California(6).. -- -- -- 6 295 2,533 22 1,222 8,440
-- ------ ------- --- ------ ------- --- ------ --------
Total... 89 18,664 $54,904 149 27,779 $77,783 192 38,831 $100,040
== ====== ======= === ====== ======= === ====== ========
</TABLE>
- ---------------
(1) Represents the average number of sales representatives during the year. This
calculation is based on the number of sales representatives at the end of
each calendar quarter during the indicated year.
(2) Cumulative number of Owners at the end of the year, excluding Owners who
purchased Vacation Credits at Eagle Crest and Running Y.
(3) Includes Upgrade Sales.
(4) Comprised of three off-site sales offices (Kirkland, Washington, which
opened in October 1989 and moved to Seatac, Washington in February 1994;
Vancouver, Washington, which opened in February 1994; and Lynnwood,
Washington, which opened in June 1995) and three on-site sales offices
(Leavenworth, Washington, which opened in September 1994, Birch Bay,
Washington, which opened in June 1995, and Gleneden Beach, Oregon, which
opened in February 1996). Those figures include an off-site sales office in
Bellingham, Washington, which opened in July 1990, and was consolidated into
the Lynnwood and Birch Bay offices in June 1995.
(5) Comprised of three off-site sales offices: Santa Clara, which opened in
April 1991, Sacramento, which opened in July 1991, and Vallejo, which opened
in May 1995.
(6) Comprised of the Ontario off-site sales office which opened in April 1996.
These figures include sales from an on-site sales office at Palm Springs,
which opened in April 1995 and was consolidated into the Ontario sales
office in August 1996. The Company opened a new off-site sales office in
Costa Mesa in February 1997.
The Company believes the advantages of using off-site sales offices
compared to sales offices located at more remote resorts include (i) access to
larger numbers of potential customers, (ii) convenience for prospective
customers to attend a sales presentation, (iii) access to a wider group of
qualified sales personnel due to more convenient work locations, (iv) ability to
open new sales offices quickly and without significant capital expenditures and
(v) lower marketing costs to attract prospective customers to visit a sales
office.
The Company's off-site sales offices are approximately 5,000 square feet
and include a theater, sales area and reception area. Each off-site sales center
is staffed by a sales manager, an office administrator, approximately 10 to 25
salespeople, two verification representatives, and additional staff for guest
registration and clerical assistance. The on-site sales offices are
approximately 2,500 square feet and generally include similar facilities and a
smaller number of staff compared to the off-site sales offices.
The Company uses a variety of marketing programs to attract prospective
Owners, including sponsored promotional contests offering vacation packages or
gifts, targeted mailings and telemarketing efforts, and various other
promotional programs. The Company also co-sponsors sweepstakes, giveaways and
other promotional programs with professional teams at major sporting events
(such as Portland Trail Blazers basketball games and Seattle Mariners baseball
games) and with supermarkets. Management believes that a variety of marketing
programs supplemented with the use of independent marketing agents is the most
32
<PAGE> 34
effective strategy to reach different segments of the population. The Company
continually monitors and adjusts its marketing programs to improve efficiency
and recently established a website on the Internet. Trendwest targets
prospective Owners through an analysis of age, income and travel interests. The
Company delivers targeted prospective Owners a notice related to the specific
promotion, inviting the prospective Owner to call the Company's toll-free voice
mail system to leave a return phone number. Those persons who call the Company
and leave their phone number receive a call from the Company to invite them to
visit an off-site sales office and attend a sales presentation. As an incentive
to attend the presentation, the Company offers gifts, such as an overnight trip
or electronic equipment. The Company believes that its non-obtrusive method of
marketing helps maintain the quality image of the Company with its prospective
Owners and the public.
When prospective Owners visit a sales facility, they are greeted by a host
or hostess and are shown to the theater to view a 30-minute, multi-media
presentation describing the benefits of timeshares in general, and WorldMark
specifically. After the presentation, all prospective owners are introduced to
WorldMark and the benefits of becoming an Owner by a representative of
Trendwest. The speaker introduces the guests to their salesperson, who provides
more specific information, answers questions and invites the guest to join
WorldMark. Audience size is limited to about 20 prospects per presentation. Each
sales office generally conducts three or four presentations per day, five days a
week.
Printed information regarding Trendwest and its properties, as well as the
rights and obligations of Owners, is provided to each prospective member before
Vacation Ownership Interests are sold. Prior to finalizing a sale, each new
Owner meets with one of the Company's verification representatives to discuss
the new Owner's reasons for joining and to review the rights and obligations of
Owners. The purpose of this meeting is to allow prospective Owners to review
their proposed commitment in an environment separate from the sales process.
Under the laws of each state where the Company sells Vacation Ownership
Interests, each purchaser has a right to rescind the purchase of Vacation
Credits for a period ranging from three to seven calendar days following the
later of the date the contract was signed or the date the purchaser received the
last of the documents required to be provided by the Company, depending on the
state. The Company's current practice is to allow all purchasers a seven day
rescission period, even if state law allows a shorter period. During 1995 and
1996, the Company had a rescission rate of 18.9% and 17.7%, respectively, which
is consistent with the Company's historical experience.
The Company's salespeople are trained to use a soft sales approach. The
salespeople emphasize the advantages of becoming an Owner, including
convenience, flexibility, ownership and affordability. The Company believes the
success of its sales approach is reflected not only by the amount of sales of
Vacation Credits to new Owners, but also by the amount of sales of Vacation
Credits to "non-Owner" referrals. Sales to non-Owner referrals, who are persons
referred to the Company by those who have attended a sales presentation but who
did not purchase Vacation Credits themselves, accounted for $2.3 million and
$4.0 million of the Company's net sales of Vacation Credits during 1995 and
1996, respectively.
Trendwest offers existing Owners cash awards for referrals of new Owners.
The Company maintains a staff of marketing individuals who specialize in
promoting referrals by existing Owners. In addition, as part of the Company's
ongoing marketing efforts, it offers existing Owners the opportunity to purchase
additional Vacation Credits generally at a discount from the current price.
Owners may purchase additional Vacation Credits in increments of 1,000.
Trendwest currently employs 20 sales representatives who specialize in Upgrade
Sales. Sales of Vacation Credits from the Company's owner referral program and
Upgrade Sales contributed in the aggregate approximately 25.3% and 29.0% of the
Company's net sales in 1995 and 1996, respectively.
CUSTOMER FINANCING
Since an important component of the Company's sales strategy is the
affordability of Vacation Credits, the Company believes that a significant
portion of its sales of Vacation Credits will continue to be financed by the
Company. In 1996, the average new Owner purchased approximately 6,600 Vacation
Credits for a purchase price of approximately $8,600 and the Company financed
approximately 87% of the aggregate
33
<PAGE> 35
purchase price of Vacation Credits sold to new Owners with an average new Note
Receivable of approximately $7,650. During 1996, the aggregate amount of Notes
Receivable generated in connection with the sale of Vacation Credits to new
Owners was approximately $79.1 million. The Company requires a down payment of
at least 10% of the purchase price and provides a term of up to seven years and
an interest rate of 13.9% or 14.9% per annum, depending on the method of payment
selected. Because the Company offers a discount if the full purchase price for
Vacation Credits is received within 90 days after the purchase is completed, the
Company received full payment in 1996 for approximately 17% of Vacation Credit
sales to new Owners during this 90 day period.
Existing Owners purchasing additional Vacation Credits must either make a
down payment of 10% of the price of the Upgrade Sales or have sufficient equity
in their existing Vacation Credits to provide at least 10% of the value of all
Vacation Credits, including the Upgrade. The amount of the existing receivable
is combined with the purchase price of the additional Vacation Credits purchased
and the interest rate and the term of the Note Receivable may be modified,
subject to a maximum term of ten years.
At December 31, 1996, an aggregate of $179.2 million of Notes Receivable
were outstanding, of which approximately $52.4 million with a weighted average
interest rate of 14.1% per annum had been retained by the Company. The balance
of approximately $126.8 million of Notes Receivable had been sold by the Company
prior to that date, although the Company retained limited recourse liability
with respect to these Notes Receivable. See Notes 4, 5 and 15(a) to Notes to
Combined Financial Statements. The Company may continue to sell a substantial
amount of its Notes Receivable. See "-- Finance Subsidiaries" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Notes Receivable become delinquent when a scheduled payment is 30 days or
more past due and reservation privileges are suspended when a scheduled payment
is 60 days or more past due. At December 31, 1996, approximately $3.2 million of
Notes Receivable, including Notes Receivable previously sold by the Company,
were past due 60 days or more. The Notes Receivable are secured by a security
interest in the related Vacation Credits. The Company's practice has been to
continue to accrue interest on Notes Receivable until such accounts are deemed
uncollectible, at which time the Company writes off such Notes Receivable and
records as an expense any interest that had been accrued, reclaims the related
Vacation Credits that secure such Notes Receivable and returns such Vacation
Credits to inventory available for resale.
The Company maintains a reserve for doubtful accounts in respect of the
Notes Receivable owned by the Company and a reserve for recourse liability in
respect of the Notes Receivable that have been sold by the Company. The
aggregate amount of these reserves at December 31, 1995 and 1996 were $8.0
million and $11.2 million, respectively, representing approximately 6.3% of the
total portfolio of Notes Receivable at those dates, including the Notes
Receivable that had been sold by the Company. No assurance can be given that
these reserves will be adequate, and if the amount of the Notes Receivable that
is ultimately written off materially exceeds the related reserves, the Company's
business, results of operations and financial condition could be materially
adversely affected.
Sage Systems, Inc. ("Sage"), a licensed escrow company, services the
Company's entire portfolio of Notes Receivable under an Escrow Agreement with
the Company. Under the Escrow Agreement, contracts for the sale of Vacation
Credits by the Company, and the funds received from such sales, are placed in
escrow with Sage. The escrowed funds and documents are released to the Company
when the Company certifies that it has sufficient Vacation Credits available for
sale, the applicable state-mandated cancellation period (under which a purchaser
may rescind his purchase) has expired, and Sage receives notice from the Company
that a rescission notice has not been received from the purchaser. The Company
pays Sage a fee of $35 per account serviced under the Escrow Agreement. The
Company and Sage are also parties to a Service Agreement under which Sage is
responsible for maintaining a data processing system to process bills and
receive monthly receivable payments. The Company pays Sage a monthly fee of
$1.75 per account under the Service Agreement. The Company handles billing
inquiries and all other personal interaction with the Owners, including
collections on its Notes Receivable. Collections of delinquent installment
accounts are administered by 22 collection representatives. See "Certain
Transactions -- Relationship with Sage Systems."
34
<PAGE> 36
FINANCE SUBSIDIARIES
TW Holdings, Inc. ("TW") was organized in 1993 to purchase Notes Receivable
at face value plus accrued interest. TW sells these Notes Receivable to a group
of banks led by Seattle-First National Bank (the "Bank Group") pursuant to a
receivables transfer agreement. Through TW, the Company sold eligible Notes
Receivable of $23.9 million in 1994, $38.5 million in 1995 and $42.1 million in
1996 to the Bank Group. The sales are subject to recourse for defaults and the
Company maintains a reserve for recourse liability. See Note 5 of Notes to
Combined Financial Statements.
The present commitment of the Bank Group is $68.0 million and it is subject
to an overcollateralization pool of 25% of the balance of outstanding Notes
Receivable sold to the Bank Group. At December 31, 1996, the Bank Group held
Notes Receivable with a remaining principal balance of $55.0 million. TW's
agreement with the Bank Group is subject to annual renewals on June 30 of each
year. In the event of nonrenewal of the commitment, the Company would not be
able to sell additional Notes Receivable to the Bank Group.
In April 1996, the Company sold $30.1 million of Notes Receivable to a
special purpose company, Trendwest Funding I, Inc. ("TFI"). In addition, the
Bank Group sold $47.1 million of Notes Receivable purchased from TW to another
special purpose company. The special purpose companies sold the receivables to
TRI Funding Company I, L.L.C. ("TFL"), a special purpose limited liability
company, and TFL issued $70.0 million of 7.42% fixed rate senior notes, series
1996-1 to private institutional investors. The notes were rated 'A' by Fitch
Investors and are secured by the Notes Receivable owned by TFL. The rating
reflects credit enhancements of a 10% overcollateralization and a 2% minimum
reserve account. The notes have a stated maturity of May 15, 2004.
Both TW and TFI are wholly owned by Jeld-Wen. Immediately prior to the
closing of the Offering, the Company will acquire TW and TFI from Jeld-Wen in
exchange for shares of the Company's Common Stock. See "Certain
Transactions -- Acquisition of Finance Subsidiaries."
PROPERTY OWNERSHIP
Unlike many "right-to-use" timeshare operations in which a developer sells
timeshare interests in properties it owns, the Company does not own the
properties designated for timeshare use. Rather, when the Company purchases
resort property, it vests in WorldMark title to the property free and clear of
any debt encumbrance. With respect to property developed by the Company, the
Company may initially obtain title in the undeveloped property and then deed the
developed resort property in WorldMark. At the time the Company vests title to
the property in WorldMark, a "Declaration of Vacation Owner Program" is recorded
on the property. This declaration establishes the usage rights of Owners as a
covenant on title, thus protecting those rights against the effect of any future
blanket encumbrance. This ownership structure is designed to protect the
timeshare usage rights of the Owners and complies with statutory regulations.
The Company's only consideration for paying for the properties and for
arranging for the seller of the property to transfer title of the property
directly to WorldMark is the exclusive right to sell Vacation Credits and to add
new properties and additional units at the Company's discretion. The Company's
rights to sell Vacation Credits against the deeded properties are protected by a
security interest in the unsold inventory of Vacation Credits. This lien
prevents WorldMark from revoking such rights or transferring them to another
party.
Vacation Credits are allocated to each unit based on its vacation use value
relative to existing properties. Vacation Credits are assigned for weeks of
peak, shoulder and off-peak use, reserving time for Bonus Time, repairs and
maintenance. The aggregate Vacation Credits assigned to each unit may not be
changed in the future, and the actual number of Credits assigned are contained
in the recorded declaration. This system of irrevocable allocation and
registration with the state protects the Owners by preventing dilution in the
usage value of the Owner's Vacation Credits.
As of December 31, 1996, WorldMark had a reserve for replacement costs of
approximately $3.3 million for all depreciable assets (e.g., furniture,
appliances, carpeting, roofs and decks) of the WorldMark Resorts. In those
WorldMark Resorts where WorldMark owns only a small percentage of the units in a
complex and
35
<PAGE> 37
belongs to an independent homeowners' association, the dues paid to such
association by WorldMark are partially used to provide adequate reserves for
replacement costs relating to such properties.
PARTICIPATION IN VACATION INTERVAL EXCHANGE NETWORK
The Company believes that sale of Vacation Credits is made more attractive
by the Company's participation in the vacation interval exchange network
operated by RCI. In a 1995 study sponsored by the Alliance for Timeshare
Excellence and ARDA, the exchange opportunity was cited by purchasers of
vacation intervals as the most significant factor in determining whether to
purchase a vacation interval. For an annual membership fee (currently $67),
Owners may participate in RCI, which allows Owners to exchange Vacation Credits
for an occupancy right at a participating resort in RCI based upon availability
and the payment of an additional exchange fee (currently $90 to $100). WorldMark
pays the RCI annual membership fee for the Owner's first year. An Owner may
exchange Vacation Credits for an occupancy right in a resort participating in
the RCI network by requesting occupancy and specifying the desired unit size and
time period. RCI provides an Owner hotline with direct phone access to
representatives who are knowledgeable about WorldMark and are responsible for
assisting Owners with an exchange. RCI assigns a weekly exchange value for
Vacation Credits. This exchange value is based upon a number of factors. If RCI
is unable to meet the Owner's initial request, it suggests alternative resorts
based on availability.
Founded in 1974, RCI, which was recently acquired by HFS Incorporated, has
grown to be the world's largest vacation interval exchange organization. As of
March 20, 1997 it had a total of 3,109 participating resort facilities and over
2.2 million members worldwide. During 1995, RCI processed approximately 1.7
million vacation interval exchanges. During 1995, approximately 97% of all
exchange requests were ultimately fulfilled by RCI, and approximately 58% of all
exchange requests were confirmed on the day of the request.
COMPETITION
The Company is subject to significant competition from other entities
engaged in the business of resort development, sales and operation, including
vacation interval ownership, condominiums, hotels and motels. Some of the
world's most recognized lodging, hospitality and entertainment companies have
begun to develop and sell vacation intervals in resort properties. Major
companies that now operate or are developing or planning to develop vacation
interval resorts include Marriott, Disney, Hilton, Hyatt, Four Seasons, Inter-
Continental, Westin and Promus. In addition, other publicly-traded companies
focused on the timeshare industry, such as Signature, Fairfield and Vistana,
currently compete, or may in the future compete, with the Company. Many of these
entities possess significantly greater financial, marketing and other resources
than those of the Company. Management believes that industry competition will be
increased by recent and potential future consolidation in the timeshare
industry.
The Company has entered into marketing agreements with affiliates of its
parent, Jeld-Wen, pursuant to which these affiliates may market Vacation
Ownership Interests for their own account at Eagle Crest Resort in Redmond,
Oregon and Running Y Resort in Klamath Falls, Oregon in exchange for their
contribution to WorldMark of condominium units at those resorts. These sales
activities are competitive with the Company's marketing activities, particularly
in the Oregon and northern California markets. See "Certain Transactions --
Relationship with Jeld-Wen."
GOVERNMENTAL REGULATION
General. The Company's marketing and sales of Vacation Credits and certain
of its other operations are subject to extensive regulation by the states and
foreign jurisdictions in which the WorldMark Resorts are located and in which
Vacation Credits are marketed and sold and also by the federal government.
State and Provincial Regulations. Most U.S. states and Canadian provinces
have adopted specific laws and regulations regarding the sale of vacation
interval ownership programs. Washington, Oregon, California, Hawaii and British
Columbia require the Company to register WorldMark Resorts, the Company's
vacation program and the number of Vacation Credits available for sale in such
state or province with a designated
36
<PAGE> 38
state or provincial authority. The Company must amend its registration if it
desires to increase the number of Vacation Credits registered for sale in that
state or province. Either the Company or the state or provincial authority
assembles a detailed offering statement describing the Company and all material
aspects of the project and sale of Vacation Credits. The Company is required to
deliver the offering statement to all new purchasers of Vacation Credits,
together with certain additional information concerning the terms of the
purchase. Hawaii imposes particularly stringent and broad regulation
requirements for the sale of interests in interval ownership programs that have
resort units located in Hawaii. The Company has incurred substantial
expenditures over an extended period of time in the registration process in
Hawaii and still has not completed this process. Hawaii has allowed the use of
WorldMark units in Hawaii, provided that the Company continues in good faith to
pursue registration in Hawaii. Laws in each state where the Company sells
Vacation Credits grant the purchaser of Vacation Credits the right to cancel a
contract of purchase at any time within a period ranging from three to seven
calendar days following the later of the date the contract was signed or the
date the purchaser received the last of the documents required to be provided by
the Company. Most states have other laws which regulate the Company's
activities, such as real estate licensure laws, laws relating to the use of
public accommodations and facilities by disabled persons, sellers of travel
licensure laws, anti-fraud laws, advertising laws, and labor laws.
Federal Regulations. The Federal Trade Commission has taken an active
regulatory role in the interval ownership industry through the Federal Trade
Commission Act, which prohibits unfair or deceptive acts or competition in
interstate commerce. Other federal legislation to which the Company is or may be
subject includes the Truth-In-Lending Act and Regulation Z, the Equal
Opportunity Credit Act and Regulation B, the Interstate Land Sales Full
Disclosure Act, the Real Estate Standards Practices Act, the Telephone Consumer
Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act,
the Civil Rights Act of 1964 and 1968, the Fair Housing Act and the Americans
with Disabilities Act.
Although the Company believes that it is in material compliance with all
federal, state, local and foreign laws and regulations to which it is currently
subject, there can be no assurance that it is in fact in compliance. Any failure
by the Company to comply with applicable laws or regulations could have a
material adverse effect on the Company's business, results of operations and
financial condition. In addition, the Company will continue to incur significant
costs to remain in compliance with applicable laws and regulations, and such
costs could increase substantially in the future.
Environmental Matters. Under various federal, state, local and foreign
laws, ordinances and regulations, the owner or operator of real property
generally is liable for the costs of removal or remediation of certain hazardous
or toxic substances located on or in, or emanating from, such property, as well
as related costs of investigation and property damage. Such laws often impose
such liability without regard to whether the owner or operator knew of, or was
responsible for, the presence of such hazardous or toxic substances. Other
federal and state laws require the removal or encapsulation of
asbestos-containing material when such material is in poor condition or in the
event of construction, demolition, remodeling or renovation. Other statutes may
require the removal of underground storage tanks. Noncompliance with these and
other environmental, health or safety requirements may result in the need to
cease or alter operations at a property. Although the Company conducts an
environmental assessment with respect to the properties it acquires for
WorldMark, the Company has not received a Phase I environmental report for any
WorldMark Resort. There can be no assurance that any environmental assessments
undertaken by the Company with respect to the WorldMark Resorts have revealed
all potential environmental liabilities, or that an environmental condition does
not otherwise exist as to any one or more of the WorldMark Resorts that could
have a material adverse effect on the Company's business, financial condition
and results of operations.
EMPLOYEES
As of March 31, 1997, Trendwest had 681 full-time employees, with 403 in
sales, 122 in marketing and 156 in administration. The Company believes that its
employee relations are good. None of the Company's employees is represented by a
labor union.
37
<PAGE> 39
The Company enforces a stringent drug policy with all employees. All
prospective employees are tested for the presence of impairing substances before
being hired by the Company. Employees of the Company are tested periodically for
the presence of impairing substances and, in addition, any Company employee may
be tested for such substances for cause. Any employee who is found to be under
the influence of an impairing substance is subject to appropriate disciplinary
action, including termination.
INSURANCE; LEGAL PROCEEDINGS
WorldMark maintains property insurance and liability insurance for the
units at the WorldMark Resorts, with certain policy specifications, insured
limits and deductibles. Certain types of losses, such as losses arising from
earthquakes, floods, or acts of war, are generally excluded from WorldMark's
insurance coverage. Should an uninsured loss or loss in excess of insured limits
occur, WorldMark has the option to either (i) remove such units from the
Vacation Credit system, which would result in a proportionate dilution of
vacation time available for the Vacation Credits which have been sold, or (ii)
pay for the related costs of replacement. Although WorldMark's board of
directors may impose a limited amount of special assessments to pay for capital
improvements or major repairs, there can be no assurance that WorldMark would be
able to increase assessments to provide sufficient funds to pay for all possible
capital improvements and major repairs of the units at the WorldMark Resorts. In
such an event, the Company may be required to advance funds to WorldMark in
order to maintain the quality of the WorldMark Resorts or WorldMark may need to
defer certain improvements or repairs, which could have an adverse effect on the
Company's liquidity and the sale of Vacation Credits. See "Risk
Factors -- Natural Disasters; Uninsured Loss."
The Company is not aware of any legal proceedings pending against it. The
Company may be subject to claims and legal proceedings from time to time in the
ordinary course of business.
38
<PAGE> 40
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS; KEY EMPLOYEES
The following table sets forth certain information concerning each of the
Company's directors and executive officers, as well as certain other key
employees of the Company. The Company intends to add three additional
independent directors to its Board of Directors after consummation of the
Offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- -------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
Directors and Executive Officers:
William F. Peare...................... 59 President, Chief Executive Officer and Director
Jeffery P. Sites...................... 40 Executive Vice President, Chief Operating Officer,
Secretary and Director
Gary A. Florence...................... 55 Vice President, Chief Financial Officer and Treasurer
J. Michael Moyer...................... 60 Senior Vice President
Gerald T. Lynch....................... 54 Vice President -- Marketing
Ronald A. Buzard...................... 65 Vice President -- Sales
Alan B. Schriber...................... 45 Vice President -- Administration
Roderick C. Wendt..................... 41 Director
Jerol E. Andres....................... 53 Director
Douglas Kintzinger.................... 35 Director
Other Key Employees:
Gene F. Hensley....................... 44 Vice President -- Operations
Alice R. Heuple....................... 51 Vice President -- Product Development
Dan Stearns........................... 51 Vice President -- Corporate Communications
</TABLE>
WILLIAM F. PEARE has served as its President and Chief Executive Officer,
and as a director, since 1989. Mr. Peare also serves as a director and as
President of WorldMark. Mr. Peare developed the WorldMark concept and attracted
key management personnel to the Company. From 1987 to 1989, Mr. Peare served as
a management consultant for Eagle Crest Resort in Redmond, Oregon and for
Elkhorn Resort in Sun Valley, Idaho. From 1985 to 1987, Mr. Peare was a Senior
Vice President of Horizon Airlines. From 1983 to 1985, Mr. Peare served as Chief
Executive Officer of All Seasons Resorts, Inc. ("All Seasons"), a
publicly-traded membership campground company. From 1975 to 1982, Mr. Peare
served as President of Thousand Trails Inc. ("Thousand Trails"), the nation's
largest membership campground company.
JEFFERY P. SITES has served as Executive Vice President, Chief Operating
Officer, Secretary of the Company since 1989, and served as Treasurer from 1989
to January 1997. Mr. Sites has been a director of the Company since 1991. Mr.
Sites also serves as a director and as Treasurer of WorldMark. Mr. Sites
oversees the day-to-day operations of the Company. From 1987 to 1989, Mr. Sites
was Chief Financial Officer of OMT, Inc., a holding company with a variety of
businesses including an interval ownership project in Sun Valley, Idaho. From
1985 to 1987, Mr. Sites was Executive Vice President and co-founder of Venture
Out Resorts, a regional membership campground company. From 1983 to 1985, Mr.
Sites was the Controller for All Seasons.
GARY A. FLORENCE has served as Vice President, Chief Financial Officer and
Treasurer of the Company since January 1997. Prior to that time, he served as
Treasurer of Jeld-Wen, a position he held since 1992. From 1973 to 1991, Mr.
Florence served as Jeld-Wen's Corporate Controller. Mr. Florence has been
responsible for establishing the Finance Subsidiaries and structuring the Notes
Receivable sales transactions.
J. MICHAEL MOYER has served as Senior Vice President of the Company since
1989. Mr. Moyer also serves as a director and as Secretary of WorldMark. Mr.
Moyer oversees the Company's legal affairs, including property closings,
registration of the Company's product under state timeshare laws, permitting of
new developments, managing the governance of WorldMark, and directing outside
legal counsel. From 1978 to 1986, Mr. Moyer served in a similar capacity at
Thousand Trails and All Seasons.
39
<PAGE> 41
GERALD T. LYNCH has served as Vice President -- Marketing of the Company
since 1991. From 1984 to 1991, Mr. Lynch served as Director and President of
Omni Concepts, a contract sales, marketing and business management company
serving the direct sales industry. From 1983 to 1984, Mr. Lynch served as Vice
President of sales and marketing for National American Corporation, a national
developer of resort communities. From 1973 to 1983, Mr. Lynch served as Vice
President of Sweet Water Corporation ("Sweet Water"), an interval ownership
company, and as President of Time Share Realty, a wholly-owned subsidiary of
Sweet Water.
RONALD A. BUZARD has served as Vice President -- Sales since August 1993
and has overall responsibility for the Company's sales activities. Mr. Buzard
joined the Company in 1990, serving in various sales management positions. From
1987 to 1990, Mr. Buzard was a consultant in the timeshare and development
business. From 1984 to 1986, Mr. Buzard served as Vice President -- Sales for
All Seasons.
ALAN B. SCHRIBER has served as Vice President -- Administration of the
Company since January 1997, and served as Vice President -- Administration and
Finance from September 1994 to January 1997. Mr. Schriber is responsible for the
accounts receivable, data processing, contract processing, and human resources
functions for the Company. From 1987 to 1994, Mr. Schriber was Senior Vice
President of Gulf American Financial Services, which specialized in the
development, implementation, and project management of consumer credit and
accounts receivable operations and systems. From 1981 to 1987, Mr. Schriber was
Vice President of Administration for Thousand Trails.
RODERICK C. WENDT has served as a director of the Company since March 1993.
Mr. Wendt has served as the President of Jeld-Wen since March 1992.
DOUGLAS P. KINTZINGER has served as a director of the Company since March
1994. Mr. Kintzinger has been employed by Jeld-Wen in various capacities since
1987, most recently serving as Vice President and Secretary of Jeld-Wen since
March 1994.
JEROL E. ANDRES has served as a director of the Company since 1989. Since
1988, Mr. Andres has served as Chief Executive Officer and President of Eagle
Crest. From 1984 to 1988, Mr. Andres founded and was Chief Executive Officer and
President of Happy Trails Resort. Since 1993, Mr. Andres has served as a
director of Bank of the Cascades, a publicly-traded bank company. Mr. Andres
served on the board of ARDA for 11 years, serving as Chairman from 1984 to 1986.
From 1978 to 1984, Mr. Andres served as a Vice President of Thousand Trails.
GENE F. HENSLEY has served as Vice President -- Operations since December
1995 and has been employed by the Company in various managerial and sales
positions since 1990. Mr. Hensley is responsible for the day to day operations
of the WorldMark Resorts as well as the Company's reservation, exchange and
owner service departments and travel. From 1979 to 1988, Mr. Hensley worked for
Thousand Trails, ultimately assuming regional management responsibilities.
ALICE R. HEUPLE has served as Vice President -- Product Development since
1993 and has been employed by the Company in product development since 1992. Ms.
Heuple is responsible for the development of the WorldMark Resorts, managing
site development, construction, specifications and design, and purchasing. From
1980 to 1992, Ms. Heuple worked for Vacation Internationale, a vacation interval
company, serving at various times in various management positions.
DAN STEARNS has served as Vice President -- Corporate Communications since
1995 and has been employed by the Company in corporate communications since
1990. Mr. Stearns oversees the Company's audio visual, design and printing
needs, and oversees the production of monthly communications to both Owners and
Company employees. From 1988 to 1990, Mr. Stearns worked with Harmon &
Associates Real Estate as Director of Corporate Communications. From 1980 to
1988, Mr. Stearns served as President of the Stearns Group, an audio visual and
video production services company serving the vacation interval industry.
40
<PAGE> 42
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has recently established an Audit Committee and a Compensation
Committee. The Audit Committee, currently comprised of Messrs. ,
and , recommends the selection of the Company's independent
auditors and consults with the independent auditors on the Company's internal
accounting controls. The Compensation Committee, currently comprised of Messrs.
, and , recommends to the Board salaries and
bonuses for the Company's executive officers and administers the Company's Stock
Option Plan.
CLASSIFIED BOARD OF DIRECTORS
Upon the closing of the Offering, the Company's board of directors will be
divided into three classes. The directors in Class I are Messrs.
and , whose terms expire at the annual stockholders meeting
in 1998. The directors in Class II are Messrs. and , whose
terms expire at the annual stockholders meeting in 1999. The directors in Class
III are Messrs. and , whose terms expire at the annual
stockholders meeting in 2000. Commencing with the annual stockholders meeting in
1998 and thereafter, each director will serve for a term of three years
following the annual stockholders meeting at which such director was elected.
See "Certain Provisions of Oregon Law and of Trendwest's Articles of
Incorporation and Bylaws -- Classification of the Board of Directors."
After consummation of the Offering, the Company intends to appoint three
additional independent directors, Mr. , Mr. and Ms.
.
DIRECTOR FEES
Directors who are not employees of the Company or Jeld-Wen will receive a
fee of $ for each Board meeting attended. All directors are reimbursed
for out of pocket expenses for each Board meeting attended.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Articles of Incorporation provide that the liability of the
directors of the Company for monetary damages will be eliminated to the fullest
extent permissible under Oregon law. This is intended to eliminate the personal
liability of a director for monetary damages in an action brought by or in the
right of the Company for breach of a director's duties to the Company or its
stockholders except for liability (i) for any breach of the director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any unlawful distribution to stockholders, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision does not limit or eliminate the rights of the Company or any
stockholder to seek non-monetary relief, such as an injunction or rescission, in
the event of a breach of a director's duty of care. This provision also does not
affect the director's responsibilities under any other laws, such as the federal
or state securities or environmental laws.
The Articles of Incorporation and the Bylaws also provide that the Company
shall indemnify, to the fullest extent permitted under Oregon law, any person
who has been made, or is threatened to be made, a party to an action, suit or
legal proceeding by reason of the fact that the person is or was a director or
officer of the Corporation. The Company intends to enter into separate
indemnification agreements with each of its directors. These agreements will
require the Company to indemnify its directors to the fullest extent permitted
by law, including circumstances in which indemnification would otherwise be
discretionary. Among other things, the agreements require the Company to
indemnify directors against certain liabilities that may arise by reason of
their status or service as a director and to advance their expenses incurred as
a result of any proceeding against them as to which they could be indemnified.
The Company also intends to obtain insurance on behalf of it executive officers
and directors for certain liabilities arising out of their actions in such
capacities. The Company believes that these contractual arrangements, the
provisions in its Articles of Incorporation and Bylaws and insurance coverage
are necessary to attract and retain qualified persons as directors and officers.
41
<PAGE> 43
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the annual
compensation during 1996 for Trendwest's chief executive officer and each of the
Company's other four most highly compensated executive officers (the "Named
Executive Officers").
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION COMPENSATION(1)
- ------------------------------------------- ------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
William F. Peare........................... $96,000 $192,013 $ 7,660 10,500
President and Chief Executive Officer
Jeffery P. Sites........................... 70,000 139,991 5,953 10,500
Executive Vice President and Chief
Operating Officer
J. Michael Moyer........................... 90,000 58,159 -- 10,371
Senior Vice President
Gerald T. Lynch............................ 50,000 170,005 -- 10,500
Vice President -- Marketing
Ronald A. Buzard........................... 50,000 198,544 -- 10,500
Vice President -- Sales
</TABLE>
- ---------------
(1) These amounts were paid by the Company under the Company's retirement plan.
No options or other equity-based compensation were granted to or exercised
by any of the Named Executive Officers in 1996 and none of the Named Executive
officers beneficially owned any options at December 31, 1996.
EMPLOYMENT AGREEMENTS
Messrs. Peare and Sites will enter into employment agreements with the
Company prior to the Offering. Under the employment agreements, Mr. Peare will
receive a base annual salary of $100,000, and Mr. Sites will receive a base
annual salary of $75,000, and each will have the opportunity to receive
performance bonuses. The agreements will contain a covenant not to compete for a
period of two years in the event of termination of employment for any reason. If
employment is terminated by the Company without cause, the employee will receive
his base salary for a period of one year following the date of termination plus
the amount of bonus earned during the preceding twelve months.
1997 STOCK OPTION PLAN
Prior to the Offering, the Board of Directors will adopt the 1997 Stock
Option Plan (the "1997 Plan") and will authorize up to 5% of the number of
shares of Common Stock outstanding from time to time for issuance thereunder.
Under the 1997 Plan, options may be granted to the Company's employees,
directors, consultant and independent contractors. Only employees may receive
"incentive stock options," which are intended to qualify for certain tax
treatment; employees and nonemployees, including nonemployee directors, may
receive "nonqualified stock options," which do not qualify for such treatment.
The exercise price of all stock options under the 1997 Plan must at least equal
the fair market value of the Common Stock on the date of grant. All incentive
stock options granted under the 1997 Plan will expire ten years from the date of
grant unless terminated sooner pursuant to the provisions of the 1997 Plan.
Nonqualified stock options may have a term which exceeds ten years at the
discretion of the Board of Directors. In the event of a change of control of the
Company, including a merger or sale of substantially all of the Company's
assets, outstanding options must be assumed by any successor corporation, or
equivalent options must be substituted, or they will become fully vested and
exercisable.
42
<PAGE> 44
CERTAIN TRANSACTIONS
RELATIONSHIP WITH JELD-WEN
Background. Prior to the Offering, Jeld-Wen owned 95.2% of the outstanding
shares of Common Stock, and following completion of the Offering will own % of
the outstanding shares of Common Stock. Roderick Wendt and Douglas Kintzinger
are directors of the Company and Richard Wendt was a director of the Company
until March 1997. Richard Wendt, Roderick Wendt and Douglas Kintzinger are all
directors of Jeld-Wen. In addition, Richard Wendt, Roderick Wendt and Douglas
Kintzinger own 38.2%, 1.4% and 0.5%, respectively, of the outstanding shares of
Jeld-Wen. Jeld-Wen has established the Jeld-Wen Foundation, which is a
charitable foundation of which Richard Wendt, Roderick Wendt and William Early,
an officer and director of Jeld-Wen, are members of the Foundation's Board of
Directors. Eagle Crest GP, Inc. ("Eagle Crest"), a wholly-owned subsidiary of
Jeld-Wen, is developing the Eagle Crest Resort. Running Y Resort, Inc. ("Running
Y"), a wholly-owned subsidiary of Eagle Crest, is developing the Running Y
Resort.
Administrative Services. Jeld-Wen has provided certain administrative
services to the Company, including management services, payroll and accounting
services. The Company paid Jeld-Wen approximately $544,000, $723,000 and
$913,000 in 1994, 1995 and 1996, respectively, for such services. Jeld-Wen
provides a self-insured health, life and disability benefits plan to its
employees, in which the Company participated. The Company paid Jeld-Wen
approximately $608,000, $834,000 and $1,157,000 in 1994, 1995 and 1996,
respectively, to include the Company's employees within the Jeld-Wen plan.
Jeld-Wen also self-insures its workmen's compensation liability and the Company
also participates in that plan. The Company paid Jeld-Wen approximately
$178,000, $45,000 and $147,000 in 1994, 1995 and 1996, respectively, to include
the Company's employees within the Jeld-Wen plan. The Company did not
participate in the foregoing plans prior to January 1, 1994. The Company intends
to maintain its relationship with Jeld-Wen for certain of these administrative
services after consummation of the Offering.
Credit Facility. The Company maintains an open revolving credit line with
Jeld-Wen. The credit line has no maximum balance restriction and is payable on
demand. The Company pays Jeld-Wen interest at prime plus one percent. The
maximum month-end balance of the line outstanding to Jeld-Wen during 1994, 1995
and 1996 was approximately $5,767,000, $30,651,000 and $27,954,000,
respectively. At March 31, 1997, the Company owed Jeld-Wen approximately
$24,265,000 under the line of credit. The Company intends to repay the entire
principal amount of the line of credit from the net proceeds of the Offering.
See "Use of Proceeds."
Agreement with Eagle Crest. The Company has an agreement with Eagle Crest
whereby the Company has assigned to Eagle Crest the nonexclusive right to sell
Vacation Credits in WorldMark at Eagle Crest's resort in Redmond, Oregon and to
retain the gross proceeds from such sales. Eagle Crest must transfer condominium
units to WorldMark at no cost to WorldMark. Eagle Crest cannot sell more
Vacation Credits than has been allocated to the condominium units transferred to
WorldMark. Trendwest determines the number of Vacation Credits allocated to
those condominium units transferred to WorldMark using the same bases as other
resort units transferred by Trendwest to WorldMark by Eagle Crest. Effective
July 1, 1997, the agreement will require Eagle Crest to pay the Company a fee
equal to 3% of net sales of Vacation Credits sold at Eagle Crest. In addition,
the Company purchases Notes Receivable from Eagle Crest at face value plus
accrued interest. During 1994, 1995 and 1996, the Company purchased Notes
Receivable in the principal amount of approximately $6,005,000, $11,305,000 and
$8,993,000, respectively.
Agreement with Running Y. The Company and Running Y are parties to an
agreement under which Running Y will develop at its expense condominium units at
the Running Y Resort. The Company will pay Running Y a purchase price for each
such unit equal to the number of Vacation Credits attributable to such unit (as
determined by the Company), multiplied by the then-current price per Vacation
Credit, multiplied by 26%. The Company has purchased 20 units through March 31,
1997 at a cost of $2,680,000, and is required to purchase an additional 80 units
prior to April 2000. Effective July 1, 1997, the agreement will require Running
Y to pay the Company a fee equal to 3% of net sales of Vacation Credits sold at
Running Y. In
43
<PAGE> 45
addition, the Company purchased Notes Receivable in the principal amount of
approximately $2,157,000 in 1996.
Purchase of Notes Receivable. I&I Holdings, Ltd., a wholly-owned subsidiary
of Jeld-Wen, has purchased Notes Receivable from the Company at face value plus
accrued interest on a full recourse basis. During 1994, 1995 and 1996, I&I
Holdings, Ltd. purchased Notes Receivables with outstanding balances of
approximately $13,000, $1,321,000 and $232,000, respectively.
R & R Vista, an Oregon general partnership comprised of Richard L. Wendt
and Roderick C. Wendt, has purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1994, 1995 and
1996, R & R Vista purchased Notes Receivable with outstanding balances of
approximately $9,714,000, $3,905,000 and $3,350,000, respectively.
The Jeld-Wen Foundation purchased Notes Receivable from the Company at face
value plus accrued interest on a full recourse basis. During 1994, 1995 and
1996, the Foundation purchased Notes Receivable with outstanding balances of
approximately $297,000, $191,000 and $211,000, respectively.
Indebtedness of Management. The Company entered into a Stock Purchase
Agreement with each of William Peare and Jerol Andres for the purchase of
shares of Common Stock from the Company. As full consideration for each
such sale, Messrs. Peare and Andres executed a promissory note to the Company in
the amount of $303,210 bearing interest at 9% per annum. Mr. Andres repaid his
promissory note in December 1995, and Mr. Peare repaid his promissory note in
November 1996.
ACQUISITION OF FINANCE SUBSIDIARIES
TW Holdings, Inc. ("TW") and Trendwest Funding I, Inc. ("TFI") are
wholly-owned subsidiaries of Jeld-Wen. TW and TFI (the "Finance Subsidiaries")
were formed to enable the Company to sell and securitize Notes Receivable in
"off balance sheet" financings. In 1994, 1995 and 1996, TW and TFI purchased
$22,031,000, $45,195,000 and $75,522,000, respectively, of Notes Receivable from
the Company at face value plus accrued interest. See "Business -- Finance
Subsidiaries."
The Company and Jeld-Wen have agreed that, immediately prior to the closing
of the Offering, the Company will acquire all shares of common stock of the
Finance Subsidiaries in exchange for shares of the Company's Common Stock.
The value of the shares of the Finance Subsidiaries and the value of the shares
of Common Stock were determined in negotiations between Jeld-Wen and the
Company. As a result of this acquisition, the Finance Subsidiaries will become
wholly-owned subsidiaries of the Company. See Note 1(b) of Notes to Combined
Financial Statements.
RELATIONSHIP WITH SAGE SYSTEMS
Background. The Company and Sage, a licensed escrow company, are parties to
several administrative agreements. See "Business -- Customer Financing." Woodrow
O'Rourke, the President of Sage, is the brother-in-law of William F. Peare, a
director and the President and Chief Executive Officer of the Company.
Escrow. The Company and Sage are parties to an Escrow Agreement under which
contracts for the sale of Vacation Credits by the Company, and the funds
received from such sales, must be placed in escrow with Sage. The Company pays
Sage a fee of $35 per account for which Sage holds escrowed funds. Under the
Escrow Agreement, the Company paid Sage approximately $104,000 in 1996.
Servicing of Accounts. The Company and Sage are parties to a Service
Agreement under which Sage is responsible for maintaining a data processing
system to bill and receive monthly receivable payments. The Company pays Sage a
monthly fee of $1.75 per account serviced by Sage. Under the Service Agreement,
the Company paid Sage approximately $274,000, $387,000 and $555,000 in 1994,
1995 and 1996, respectively.
Software. The Company, Sage and James McBride, Sr., an employee of Sage,
entered into a Software Transfer Agreement in August 1994, under which Sage and
Mr. McBride granted the Company an irrevocable, royalty-free license to use
certain computer software programs. Concurrently with the Software Transfer
Agreement, the Company and Sage entered into a Software Support and Maintenance
Agreement
44
<PAGE> 46
(the "Maintenance Agreement"), under which Sage provides modifications,
improvements and customer service to the Company in connection with the licensed
computer software programs. Under the Maintenance Agreement, the Company paid
Sage an initial fee of $12,000, a retainer of $2,000 per month and labor charges
of $50 per hour for services in excess of ten hours per month. Under the
Maintenance Agreement, the Company has paid Sage approximately $47,000, $35,000
and $35,000 in 1994, 1995 and 1996, respectively.
45
<PAGE> 47
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of the Common Stock of the Company and as adjusted to reflect the sale
of shares offered hereby, with respect to (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each person who is a director or Named Executive Officer of the Company and
(iii) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
PRIOR TO THE BENEFICIAL OWNERSHIP
OFFERING(1) AFTER THE OFFERING
NAME AND ADDRESS --------------------- SHARES TO BE SOLD ---------------------
OF BENEFICIAL OWNER SHARES PERCENTAGE IN THE OFFERING SHARES PERCENTAGE
- ----------------------------------- ------ ---------- ----------------- ------ ----------
<S> <C> <C> <C> <C> <C>
Jeld-Wen(2)........................ 95.2%
William F. Peare................... 3.1
Jeffery P. Sites................... *
Ronald A. Buzard................... *
Gerald T. Lynch.................... *
J. Michael Moyer................... *
Jerol E. Andres.................... --
Douglas Kintzinger................. --
Roderick C. Wendt.................. --
All directors and executive
officers as a group (10
persons)......................... 4.5
</TABLE>
- ---------------
* Less than 1%.
(1) Each beneficial owner has the sole power to vote and to dispose of all
shares of Common Stock owned by such beneficial owner.
(2) The address of this stockholder is 3250 Lakeport Blvd., Klamath Falls,
Oregon 97601.
DESCRIPTION OF CAPITAL STOCK
The following descriptions of the Company's capital stock and of certain
provisions of the Articles of Incorporation and Bylaws are summaries which do
not purport to be complete and are subject to, and qualified in their entirety
by reference to, the Articles of Incorporation and Bylaws, forms of which are
filed as exhibits to the Registration Statement of which this Prospectus is a
part. Reference is made to such exhibits for a detailed description of the
provisions summarized below.
The Company's authorized capital stock consists of 90,000,000 shares of
Common Stock, no par value per share, and 10,000,000 shares of preferred stock,
no par value per share (the "Preferred Stock").
On the date of this Prospectus, there were shares of Common Stock
and no shares of Preferred Stock issued and outstanding. Upon the closing of the
Offering, there will be shares of Common Stock and no shares of
Preferred Stock issued and outstanding.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by the stockholders. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared from time to time by
the Board of Directors out of funds legally available therefor. In the event of
the liquidation, dissolution or winding up of the Company, holders of Common
Stock are entitled to share ratably in all assets remaining after payment of the
Company's liabilities. The right of holders of the Common Stock to elect all of
the Company's directors, to receive dividends and to share ratably in assets
upon a liquidation of the Company may be subject to the rights of holders of
shares of Preferred Stock, if any such shares are issued.
46
<PAGE> 48
PREFERRED STOCK
Pursuant to the Articles of Incorporation, the Company is authorized to
issue "blank check" Preferred Stock, which may be issued from time to time in
one or more series upon authorization by the Company's Board of Directors. The
Board of Directors, without further approval of the stockholders, is authorized
to fix the dividend rights and terms, conversion rights, voting rights,
redemption rights and terms, liquidation preferences, and any other rights,
preferences, privileges and restrictions applicable to each series of the
Preferred Stock. The issuance of Preferred Stock, while providing flexibility in
connection with possible acquisitions and other corporate purposes, among other
things, could adversely affect the voting power of the holders of Common Stock
and, under certain circumstances, make it more difficult for a third party to
gain control of the Company, discourage bids for the Company's Common Stock at a
premium to the prevailing market price or otherwise adversely affect the market
price of the Common Stock. Currently, the Company has no plans to issue shares
of Preferred Stock.
TRANSFER AGENT AND REGISTRAR
The Company has appointed as its transfer agent and
registrar.
CERTAIN PROVISIONS OF OREGON LAW
AND OF TRENDWEST'S ARTICLES OF INCORPORATION AND BYLAWS
The following paragraphs summarize certain provisions of Oregon law and the
Company's Articles and Bylaws. The summary does not purport to be complete and
is subject to, and qualified in its entirety by reference to, the Articles and
Bylaws, forms of which are filed as exhibits to the Registration Statement of
which this Prospectus is a part, and to Oregon law.
CONTROL SHARE ACQUISITIONS
Upon completion of the Offering, the Company will become subject to the
Oregon Control Share Act (Oregon Revised Statutes Sections 60.801 - 60.816). The
Oregon Control Share Act generally provides that a person (the "Acquiring
Person") who acquires voting stock of an Oregon corporation in a transaction
which results in such Acquiring Person holding more than 20%, 33 1/3% or 50% of
the total voting power of such corporation (a "Control Share Acquisition")
cannot vote the shares it acquires in the Control Share Acquisition ("control
shares") unless voting rights are accorded to such control shares by the holders
of a majority of the outstanding voting shares, excluding the control shares
held by the Acquiring Person and shares held by the Company's officers and
inside directors ("interested shares"), and by the holders of a majority of the
outstanding voting shares, including interested shares. This vote would be
required at the time an Acquiring Person's holdings exceed 20% of the total
voting power of a company, and again at the time the Acquiring Person's holdings
exceed 33 1/3% and 50%, respectively. The term "Acquiring Person" is broadly
defined to include persons acting as a group. A transaction in which voting
power is acquired solely by receipt of an immediately revocable proxy does not
constitute a "Control Share Acquisition."
The Acquiring Person may, but is not required to, submit to the Company an
"Acquiring Person Statement" setting forth certain information about the
Acquiring Person and its plans with respect to the Company. The Acquiring Person
Statement may also request that the Company call a special meeting of
stockholders to determine whether the control shares will be allowed to retain
voting rights. If the Acquiring Person does not request a special meeting of
stockholders, the issue of voting rights of control shares will be considered at
the next annual meeting or special meeting of stockholders that is held more
than 60 days after the date of the Control Share Acquisition. If the Acquiring
Person's control shares are accorded voting rights and represent a majority or
more of all voting power, stockholders who do not vote in favor of the
restoration of such voting rights will have the right to receive the appraised
"fair value" of their shares, which may not be less than the highest price paid
per share by the Acquiring Person for the control shares.
The Oregon Control Share Act will have the effect of encouraging any
potential acquiror to negotiate with the Company's Board of Directors and will
also discourage certain potential acquirors unwilling to
47
<PAGE> 49
comply with the provisions of this law. A corporation may provide in its
articles of incorporation or bylaws that this law does not apply to its shares.
The Company has not adopted such a provision and does not currently intend to do
so. This law may make the Company less attractive for takeover, and thus
stockholders may not benefit from a rise in the price of the Common Stock that a
takeover could cause.
BUSINESS COMBINATIONS
Upon completion of the Offering, the Company will become subject to the
Oregon Business Combination Act (Oregon Revised Statutes Sections
60.825 - 60.845). The Oregon Business Combination Act generally provides that in
the event a person or entity acquires 15% or more of the voting stock of an
Oregon corporation (an "Interested Stockholder"), the corporation and the
Interested Stockholder, or any affiliated entity, may not engage in certain
business combination transactions for a period of three years following the date
the person became an Interested Stockholder. Business combination transactions
for this purpose include (a) a merger or plan of share exchange, (b) any sale,
lease, mortgage or other disposition of the assets of the corporation where the
assets have an aggregate market value equal to 10% or more of the aggregate
market value of the corporation's assets or outstanding capital stock, and (c)
certain transactions that result in the issuance of capital stock of the
corporation to the Interested Stockholder. These restrictions do not apply if
(i) the Interested Stockholder, as a result of the transaction in which such
person became an Interested Stockholder, owns at least 85% of the outstanding
voting stock of the corporation (disregarding shares owned by directors who are
also officers and certain employee benefit plans), (ii) the Board of Directors
approves the share acquisition or business combination before the Interested
Stockholder acquired 15% or more of the corporation's voting stock, or (iii) the
Board of Directors and the holders of at least two-thirds of the outstanding
voting stock of the corporation (disregarding shares owned by the Interested
Stockholder) approve the transaction after the Interested Stockholder acquires
15% or more of the corporation's voting stock.
The Oregon Business Combination Act will have the effect of encouraging any
potential acquiror to negotiate with the Company's Board of Directors and will
also discourage certain potential acquirors unwilling to comply with the
provisions of this law. A corporation may provide in its articles of
incorporation or bylaws that this law does not apply to its shares. The Company
has not adopted such a provision and does not currently intend to do so. This
law may make the Company less attractive for takeover, and thus stockholders may
not benefit from a rise in the price of the Common Stock that a takeover could
cause.
CLASSIFICATION OF THE BOARD OF DIRECTORS
The Articles provide for a Board of Directors with three classes (Class I,
Class II and Class III), each class consisting as nearly as possible of
one-third of the directors. A classified Board of Directors make it more
difficult for stockholders, including those holding a majority of the
outstanding shares, to effect an immediate change in a majority of the members
of the Board of Directors. At least two annual meeting of stockholders may be
required for the stockholders to change a majority of the members of the Board
of Directors, whether or not a change in the Board of Directors would be
beneficial to the Company and its stockholders and whether or not a majority of
the Company's stockholders believe that such a change would be beneficial.
SPECIAL STOCKHOLDER MEETINGS
In order for stockholders to call special meetings, the Bylaws require the
written request of holders of shares entitled to cast at least 10% of all votes
entitled to be cast at such meeting. This provision could preclude stockholders
owning small percentages of the Company's Common Stock from calling a special
meeting to elect new directors or to take other major corporate actions, even if
such elections or other actions would be beneficial to the Company or its
stockholders. Special stockholder meetings may also be called by the President
of the Company or the Board of Directors.
48
<PAGE> 50
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have shares of
Common Stock outstanding. The shares sold in the Offering ( shares
if the Underwriters' over-allotment option is exercised in full) will be freely
tradable on the public market without restriction or further registration under
the Securities Act, except to the extent that such shares are held by an
affiliate of the Company. The remaining outstanding shares of Common Stock were
issued and sold by the Company in private transactions, and public sale thereof
will be restricted except to the extent such shares are registered under the
Securities Act or sold in accordance with an exemption from such registration.
The restricted shares of Common Stock will be eligible for public sale
pursuant to Rule 144 under the Securities Act commencing 90 days after the date
of this Prospectus. The holders of all of these shares have entered into
agreements (the "Lock-Up Agreements") with the Underwriters not to offer, sell
or otherwise dispose of any equity securities of the Company for 180 days after
the date of this Prospectus (the "lock-up period") without the prior written
consent of Montgomery Securities. Montgomery Securities may, in its sole
discretion, at any time without notice, redeem all or any part of its shares
subject to the Lock-Up Agreements during the lock-up period.
In general, Rule 144, as currently in effect, provides that any person who
has beneficially owned shares for at least one year, including an "affiliate"
(as defined in Rule 144), is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of (i) the average weekly
trading volume during the four calendar weeks preceding the sale or (ii) 1% of
the shares of Common Stock then outstanding. Sales under Rule 144 are subject to
certain manner of sale restrictions, notice requirements and availability of
current public information concerning the Company. A person who is not an
affiliate of the Company, and who has not been an affiliate within three months
prior to the sale, generally may sell shares without regard to the limitations
of Rule 144 provided that the person has held such shares for a period of at
least two years.
Any employee, director or officer of the Company holding shares purchased
pursuant to a written compensatory plan or contract (including options) entered
into prior to the Offering is entitled to rely on the resale provisions of Rule
701, which permit nonaffiliates to sell such shares without having to comply
with the public information, holding period, volume limitations or notice
requirements of Rule 144 and permit affiliates to sell their Rule 701 shares
without having to comply with the holding period restrictions of Rule 144, in
each case commencing 90 days after the date of this Prospectus.
Prior to the Offering, there has been no public market for the Common Stock
and no prediction can be made of the effect, if any, that the sale or
availability for sale of shares of Common Stock will have on the market price of
the Common Stock. Nevertheless, sales of substantial amounts of such shares in
the public market could adversely affect the market price of the Common Stock.
49
<PAGE> 51
UNDERWRITING
The Underwriters named below (the "Underwriters"), represented by
Montgomery Securities and Salomon Brothers Inc (the "Representatives"), have
severally agreed, subject to the terms and conditions of the underwriting
agreement (the "Underwriting Agreement") by and among the Company, the Selling
Stockholder and the Underwriters, to purchase from the Company and the Selling
Stockholder the number of shares of Common Stock indicated below opposite their
respective names, at the initial public offering price less the underwriting
discount set forth on the cover page of this Prospectus. The Underwriting
Agreement provides that the obligations of the Underwriters are subject to
certain conditions precedent and that the Underwriters are committed to purchase
all of the shares of Common Stock if they purchase any.
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO BE
UNDERWRITER PURCHASED
----------------------------------------------------------------- ------------
<S> <C>
Montgomery Securities............................................
Salomon Brothers Inc.............................................
------------
Total..................................................
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose to offer the shares of Common Stock to the public
initially at the public offering price set forth on the cover of this Prospectus
and to certain dealers at such price less a concession not in excess of
$ per share, and that the Underwriters and such selected dealers may
reallow a concession to other dealers not in excess of $ per share.
After the public offering of the Common Stock, the public offering price, the
concessions to selected dealers and reallowance to other dealers may be changed
by the Representatives.
The Company has granted the Underwriters an option, exercisable during the
30-day period after the date of this Prospectus, to purchase up to an additional
shares of Common Stock at the public offering price set forth on the
cover page of this Prospectus, less the underwriting discount. To the extent the
Underwriters exercise such option, each of the Underwriters will become
obligated, subject to certain conditions, to purchase such percentage of such
additional shares of Common Stock as is approximately equal to the percentage of
shares of Common Stock that it is obligated to purchase as shown in the table
set forth above. The Underwriters may exercise such option only to cover
over-allotments, if any, incurred in the sales of shares of Common Stock.
The Company, Jeld-Wen and the Selling Stockholder have agreed to indemnify
the Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
Jeld-Wen and William Peare have agreed that, for a period of 360 days from
the date of this Prospectus, they will not sell, offer to sell, contract to
sell, or otherwise sell or dispose of any shares of their Common Stock, or
options or warrants to acquire shares of Common Stock, without the prior written
consent of Montgomery Securities. The remaining directors and executive officers
of the Company and all of the remaining existing stockholders of the Company
have agreed that, for a period of 180 days from the date of this Prospectus,
they will not sell, offer to sell, contract to sell, or otherwise sell or
dispose of any shares of their
50
<PAGE> 52
Common Stock, or options or warrants to acquire shares of Common Stock, without
the prior written consent of Montgomery Securities. The Company has agreed not
to sell any shares of Common Stock for a period of 180 days from the date of
this Prospectus without the prior written consent of Montgomery Securities.
The Representatives have informed the Company that they do not intend to
confirm sales to accounts over which they exercise discretionary authority in
excess of 5% of the number of shares of Common Stock offered hereby.
Prior to the Offering, there has been no public market for the Common Stock
of the Company. The initial public offering price will be determined through
negotiations among the Company, the Selling Stockholder and the Representatives.
Among the factors to be considered in determining the initial public offering
price, in addition to prevailing market conditions, will be certain financial
information of the Company, the history of, and the prospects for, the Company
and the industry in which it competes, an assessment of the Company's
management, its past and present operations, the prospects for, and timing of,
future revenues of the Company, the present state of the Company's development,
and the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to the Company. The
initial public offering price value should not, however, be considered an
indication of the actual value of the Common Stock. Such price is subject to
change as a result of market conditions and other factors. There can be no
assurance that an active trading market will develop for the Common Stock or
that the Common Stock will trade in the public market subsequent to the Offering
at or above the initial offering price.
The Representatives have advised the Company that, pursuant to Regulation M
under the Securities Act, certain persons participating in the Offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, which may have the effect of
stabilizing or maintaining the market price of the Common Stock at a level above
that which might otherwise prevail in the open market. A "stabilizing bid" is a
bid for or the purchase of the Common Stock on behalf of the Underwriters for
the purpose of fixing or maintaining the price of the Common Stock. A "syndicate
covering transaction" is the bid for or the purchase of the Common Stock on
behalf of the Underwriters to reduce a short position incurred by the
Underwriters in connection with the Offering. A "penalty bid" is an arrangement
permitting the Representatives to reclaim the selling concession otherwise
accruing to an Underwriter or syndicate member in connection with the Offering
if the Common Stock originally sold by such Underwriter or syndicate member is
purchased by the Representatives in a syndicate covering transaction and has
therefor not been effectively placed by such Underwriter or syndicate member.
The Representatives have advised the Company that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholder by Foster Pepper & Shefelman PLLC, Seattle,
Washington. Certain legal matters in connection with the Offering will be passed
upon for the Underwriters by Orrick, Herrington & Sutcliffe LLP, San Francisco,
California.
EXPERTS
The combined financial statements of Trendwest Resorts, Inc. and certain
affiliates as of December 31, 1995 and 1996 and for each of the years in the
three year period ended December 31, 1996 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
51
<PAGE> 53
CHANGE IN ACCOUNTANTS
The Company engaged KPMG Peat Marwick LLP ("KPMG") on March 12, 1997 as the
Company's independent accountants to report on the Company's balance sheets as
of December 31, 1996 and 1995, and the related combined statements of income,
stockholders' equity and cash flows for each of the years in the three year
period ended December 31, 1996. The decision to appoint KPMG was approved by the
Company's Board of Directors.
Molatore, Peugh, McDaniel, Scroggin & Co. LLP ("MPMS") had acted as the
Company's independent accountants since 1992. None of such accountant's reports
on the Company's financial statements for any of the years reported on contained
an adverse opinion or disclaimer of opinion, nor were the opinions modified as
to uncertainty, audit scope or accounting principles, nor were there any events
of the type requiring disclosure under Item 304(a)(1)(v) of Regulation S-K under
the Securities Act. There were no disagreements with MPMS, resolved or
unresolved, on any matter of accounting principles or practices, financial
disclosure, or auditing scope or procedure, which, if not resolved to MPMS's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its reports. MPMS was not retained to report
on the Company's 1996 financial statements.
In August 1996, the Company engaged Coopers & Lybrand LLP ("C&L") as the
Company's independent accountants to report on the Company's balance sheet as of
December 31, 1995 and 1994, and the related statements of income, stockholders'
equity and cash flow for each of the years in the three year period ended
December 31, 1995. C&L did not render any report on the Company's financial
statements and was dismissed as the Company's independent accountants on
February 10, 1997. The decision to retain and subsequently to dismiss C&L was
approved by the Company's Board of Directors.
During the period of C&L's engagement, disagreements arose over the
accounting treatment of the sales of additional Vacation Credits to existing
Owners ("Upgrade Sales"). The Company contended that Upgrade Sales could be
fully recognized as income under Financial Accounting Standards Board Statement
No. 66 ("SFAS 66") without an additional 10% cash down payment, provided that
the Owner had sufficient equity in previously purchased Vacation Credits
(including prior principal payments on the Note Receivable from the previous
purchases) and additional cash down payments, if any, at the time of the Upgrade
Sale, to satisfy the 10% down payment requirement for full accrual profit
recognition under SFAS 66. C&L's position was that SFAS 66 and Emerging Issues
Task Force Issue No. 88-12 required each Upgrade Sale to have a separate 10%
cash down payment (without consideration of equity from previously purchased
Vacation Credits) before the full accrual of revenue could be recognized on such
sale. Prior to C&L's dismissal, the Company agreed to modify its revenue
recognition policies in accordance with C&L's position.
Upon an Upgrade Sale, any existing Note Receivable is cancelled and a new
Note Receivable with a seven year term is executed for the balance of the
existing Note Receivable and the financed amount of the Upgrade Sale. The
Company and C&L discussed the allocation of payments on the new Note Receivable
for the purpose of profit recognition on the Upgrade Sale. The Company's view,
as reflected in the financial statements included herein, is that the payment
due on the new Note Receivable could be bifurcated between the amount
attributable to the Upgrade Sale and the amount attributable to the extended
balance of the previous Note Receivable, and that the excess of the payment due
under the new Note Receivable over the part of the bifurcated payment
attributable to the extended balance of the previous Note Receivable could be
allocated to the financed portion of the Upgrade Sale without affecting the
accounting for the previous sale. Profit on the Upgrade Sale would be recognized
on the installment method until allocated principal payments equal to 10% of the
Upgrade Sale are received. Profit would them be recognized on the accrual
method. C&L recommended that the concurrence of the Securities and Exchange
Commission staff with this methodology be obtained prior to the filing of this
Registration Statement. C&L was prepared to accept the Company's view, provided
that the Commission staff concurred. Accordingly, at the time of C&L's
dismissal, with the exception of the issue of profit recognition on the new Note
Receivable and the effect of the allocation of principal payments on the new
Note Receivable on the recognition of profit on the previous sale, the Company
does not believe that there were any unresolved disagreements with C&L on any
matter of accounting principles or practices, financial disclosure, or auditing
scope or procedure, which, if not resolved to C&L's
52
<PAGE> 54
satisfaction, would have caused it to make reference to the subject matter of
the disagreements in connection with its reports. C&L discussed each of these
issues with members of the Board of Directors of the Company and of the board of
directors of the Company's parent, Jeld-Wen. The Company has authorized C&L to
respond fully to the inquiries of KPMG concerning each of the disagreements.
In addition, C&L advised the Company of two matters that, if further
considered in connection with its audit of the financial statements, could
materially impact the fairness of the financial statements. The matters relate
to the adequacy of the Company's allowance for doubtful accounts for receivables
from the sale of Vacation Credits and the method of calculating gains on the
sale of such receivables. Due to their dismissal, C&L did not complete the audit
procedures and inquiries necessary to conclude on these matters.
Prior to the engagement of KPMG, the Company met with representatives of
KPMG at a meeting on January 22, 1997 to discuss KPMG's experience in the
Company's industry and industry accounting practices in connection with Upgrade
Sales. At that meeting, the disagreements between the Company and C&L were
discussed. KPMG orally advised the Company that they believed that C&L's view on
the revenue recognition principles applicable to the required down payment on
Upgrade Sales was the correct interpretation of SFAS 66. KPMG did not express
any views on the other area of discussion between the Company and C&L, the
recognition of revenue from Upgrade Sales based on an allocation of principal
payments on Notes Receivable. The Company did not request, nor did it receive,
any oral or written reports from KPMG concerning the subject of the unresolved
disagreements with C&L. The Company did not consult C&L regarding the issues
which were the subject of the disagreement following the date of dismissal. KPMG
did discuss with C&L the subject matter of the disagreements and other matters
relevant to the audit of the Company's financial statements prior to KPMG's
agreement to the engagement as the Company's auditors. The Company has requested
KPMG to review the disclosure contained herein and has provided KPMG the
opportunity to furnish the Company with a letter addressed to the Commission
containing any new information, clarification of the Company's expression of
KPMG's views or the respects in which KPMG does not agree with the statements
contained herein. KPMG has reviewed the disclosure contained herein and has
advised the Company that it does not intend to deliver such a letter to the
Company.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement. For further information with respect to Trendwest and
the Common Stock offered hereby, reference is hereby made to such Registration
Statement and the exhibits thereto. Statements contained in this Prospectus as
to the contents of any contract or other document are not necessarily complete
and in each instance, reference is made to the copy of such contract or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. Copies of the Registration
Statement may be obtained from the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Seven World Trade Center, New York, New York 10048 and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission at its
Washington address upon payment of the fees prescribed by the Commission or may
be examined without charge at the offices of the Commission. The Commission
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission. The address of the Commission's World Wide Web site is
http://www.sec.gov.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by an independent public accounting firm
and quarterly reports for the first three quarters of each fiscal year
containing unaudited financial information.
53
<PAGE> 55
TRENDWEST RESORTS, INC. AND CERTAIN AFFILIATES
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Combined Balance Sheets............................................................... F-3
Combined Statements of Income......................................................... F-4
Combined Statements of Stockholders' Equity........................................... F-5
Combined Statements of Cash Flows..................................................... F-6
Notes to Combined Financial Statements................................................ F-7
</TABLE>
F-1
<PAGE> 56
INDEPENDENT AUDITORS' REPORT
The Stockholders
Trendwest Resorts, Inc.
TW Holdings, Inc.
Trendwest Funding I, Inc.:
We have audited the accompanying combined balance sheets of Trendwest Resorts,
Inc. and certain affiliates as of December 31, 1995 and 1996, and the related
combined statements of income, stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1996. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Trendwest Resorts,
Inc. and certain affiliates as of December 31, 1995 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG Peat Marwick LLP
Seattle, Washington
May 2, 1997, except for note 18, which is as of May 8, 1997
F-2
<PAGE> 57
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- -------
<S> <C> <C>
Assets:
Cash..................................................................... $ 135 $ 93
Restricted cash.......................................................... 381 709
Notes receivable, net of allowance for doubtful accounts, sales returns
and deferred gross profit............................................. 38,161 40,777
Accrued interest and other receivables................................... 4,184 4,606
Excess servicing asset................................................... 6,451 10,839
Inventories.............................................................. 10,594 16,247
Property and equipment, net.............................................. 4,834 5,912
Deferred income taxes.................................................... 1,938 2,360
Other assets............................................................. 2,129 3,116
------- -------
Total assets..................................................... $68,807 $84,659
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable......................................................... $ 1,057 $ 1,037
Accrued liabilities...................................................... 1,490 2,100
Accrued construction in progress......................................... 950 2,089
Due to Parent............................................................ 22,284 21,316
Allowance for recourse liability on notes sold........................... 2,535 5,409
Income taxes payable to Parent........................................... 1,196 1,909
Notes payable............................................................ 2,542 1,055
------- -------
Total liabilities................................................ 32,054 34,915
------- -------
Stockholders' equity:
Common stock............................................................. 14,969 14,970
Employee notes receivable for common stock............................... (314) --
Retained earnings........................................................ 22,098 34,774
------- -------
Total stockholders' equity....................................... 36,753 49,744
Commitments and contingencies
------- -------
Total liabilities and stockholders' equity....................... $68,807 $84,659
======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-3
<PAGE> 58
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------- ------- --------
<S> <C> <C> <C>
Revenues:
Vacation Credit sales, net..................................... $54,904 $77,783 $100,040
Finance income................................................. 3,736 5,368 7,143
Gains on sales of notes receivable............................. 1,635 3,222 5,673
Resort management services..................................... 2,805 1,579 1,501
Other.......................................................... 763 1,226 2,552
------- ------- --------
Total revenues......................................... $63,843 $89,178 $116,909
------- ------- --------
Costs and operating expenses:
Vacation Credit cost of sales.................................. $15,070 $20,484 $ 27,400
Resort management services..................................... 2,613 1,283 859
Sales and marketing............................................ 25,615 36,374 47,810
General and administrative..................................... 6,588 8,391 10,904
Provision for doubtful accounts and recourse liability......... 4,537 6,522 7,467
Interest....................................................... 881 2,380 2,445
------- ------- --------
Total costs and operating expenses..................... 55,304 75,434 96,885
------- ------- --------
Income before income taxes............................. 8,539 13,744 20,024
Income tax expense............................................... 3,214 4,979 7,348
------- ------- --------
Net income............................................. $ 5,325 $ 8,765 $ 12,676
======= ======= ========
Unaudited pro forma net income per share of common stock......... $ 451.23
Unaudited pro forma weighted average shares of common stock
outstanding.................................................... 28,092
========
</TABLE>
See accompanying notes to combined financial statements.
F-4
<PAGE> 59
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EMPLOYEE
CLASS A CLASS B NOTES TOTAL
COMMON STOCK COMMON STOCK RECEIVABLE STOCK-
--------------- --------------- FOR COMMON RETAINED HOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCK EARNINGS EQUITY
------ ------ ------ ------ ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993............... 14,200 $5,200 100 $8,500 -- $ 8,608 $22,308
Issuance of Trendwest common stock to
employees for notes...................... 2,625 910 -- -- (910) -- --
Issuance of Trendwest common stock to
Parent................................... 875 303 -- -- -- -- 303
Dividends declared and paid................ -- -- -- -- -- (480) (480)
Net income................................. -- -- -- -- -- 5,325 5,325
------ ------ --- ------ ---- ---- ------
Balance at December 31, 1994............... 17,700 $6,413 100 $8,500 (910) $13,453 $27,456
Exchanges for parent company stock......... -- -- -- -- 607 -- 607
Issuance of Trendwest common stock to
employees for notes...................... 472 56 -- -- (41) -- 15
Note payments.............................. -- -- -- -- 30 -- 30
Dividends declared and paid................ -- -- -- -- -- (120) (120)
Net income................................. -- -- -- -- -- 8,765 8,765
------ ------ --- ------ ---- ---- ------
Balance at December 31, 1995............... 18,172 $6,469 100 $8,500 (314) $22,098 $36,753
Issuance of common stock, Trendwest
Funding.................................. 1,000 1 -- -- -- -- 1
Note payments.............................. -- -- -- -- 314 -- 314
Net income................................. -- -- -- -- -- 12,676 12,676
------ ------ --- ------ ---- ---- ------
Balance at December 31, 1996............... 19,172 $6,470 100 $8,500 -- $34,774 $49,744
====== ====== === ====== ==== ==== ======
</TABLE>
<TABLE>
<CAPTION>
1996 PRO FORMA
1995 1996 (UNAUDITED)
------------------------ ------------------------ -----------------------
ISSUED AND ISSUED AND ISSUED AND
AUTHORIZED OUTSTANDING AUTHORIZED OUTSTANDING AUTHORIZED OUTSTANDING
---------- ----------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Trendwest:
Common Stock, no par value.......... 20,000 17,972 20,000 17,972 90,000,000 28,092
Preferred Stock, no par value....... -- -- -- -- 10,000,000 --
TW Holdings:
Class A, no par value............... 200 200 200 200 -- --
Class B, no par value............... 200 100 200 100 -- --
Trendwest Funding..................... -- -- 1,000 1,000 -- --
------ ------ ------ ------ ------ ------
</TABLE>
See accompanying notes to combined financial statements.
F-5
<PAGE> 60
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................. $ 5,325 $ 8,765 $ 12,676
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization........................... 302 330 502
Amortization of excess servicing asset.................. 883 1,481 2,735
Provision for doubtful accounts, recourse liability and
sales reversals....................................... 5,500 7,655 10,078
Recoveries of notes receivable charged off.............. 138 113 72
Excess servicing spread on notes receivables sold....... (2,174) (3,258) (5,674)
Change in deferred gross profit......................... 711 1,480 2,737
Deferred income tax expense............................. (1,000) (364) (422)
Issuance of notes receivable............................ (50,278) (71,052) (91,593)
Proceeds from sale and repayment of notes receivable.... 42,884 57,749 88,645
Purchase of notes receivable............................ (6,005) (11,305) (11,150)
Changes in certain assets and liabilities:
Increase in restricted cash........................... (161) (110) (328)
Inventories........................................... (9,576) 1,493 (5,653)
Accounts payable and accrued liabilities.............. 3,928 (3,279) 1,729
Income taxes payable to Parent........................ (134) (2,207) 713
Other assets.......................................... (1,951) (1,740) (1,540)
-------- -------- --------
Net cash provided by (used in) operating
activities....................................... (11,608) (14,249) 3,527
-------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment......................... (229) (4,312) (1,429)
Proceeds from sale of marketable equity securities......... -- 4,219 --
-------- -------- --------
Net cash used in investing activities.............. (229) (93) (1,429)
-------- -------- --------
Cash flows from financing activities:
Proceeds from notes payable................................ 5,366 100 --
Payments on notes payable.................................. (6,203) (1,529) (1,487)
Net change in revolving credit line with Parent............ 12,538 15,877 (968)
Dividends paid............................................. (480) (120) --
Issuance of common stock................................... 303 15 1
Payments on notes receivable for stock..................... -- 30 314
-------- -------- --------
Net cash provided by (used in) financing
activities....................................... 11,524 14,373 (2,140)
-------- -------- --------
Net increase (decrease) in cash.................... (313) 31 (42)
Cash at beginning of period.................................. 417 104 135
-------- -------- --------
Cash at end of period........................................ $ 104 $ 135 $ 93
======== ======== ========
Supplemental disclosures of cash flow information -- cash
paid during the period for:
Interest................................................... $ 905 $ 2,091 $ 2,579
Income taxes............................................... 5,111 7,547 7,056
======== ======== ========
Supplemental schedule of noncash investing and financing
activities:
Issuance of common stock for notes receivable.............. $ 910 $ 41 $ --
======== ======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-6
<PAGE> 61
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(1) DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
(A) DESCRIPTION OF BUSINESS
Trendwest Resorts, Inc. (Trendwest) and certain affiliates as identified in
note 1(b) (Company) is comprised of certain entities under the control of a
common stockholder. The Company generates revenues from the sale and financing
of Vacation Credits in WorldMark -- The Club (WorldMark), which typically
entitle the owner to use a fully furnished vacation resort based on the number
of Vacation Credits purchased. Vacation Credits are created through the
contribution of resort units developed or purchased by the Company to WorldMark.
The Company also manages resort properties under a management agreement with
WorldMark (see Note 15(b)). WorldMark is a separate entity which owns the
contributed properties for the benefit of Vacation Credit owners (members).
The Company sells Vacation Credits to individuals in the Western United
States. These sales are financed by the Company after requiring a minimum 10%
down payment and the note balance is secured by the Vacation Credits sold. The
cash receipts of the Company are primarily from the sale and collection of the
notes receivable.
(B) BASIS OF PRESENTATION
The combined financial statements include the accounts of Trendwest, TW
Holdings, Inc. (TW Holdings) and Trendwest Funding I, Inc. (Trendwest Funding).
Trendwest Funding is included in the combined financial statements from April
19, 1996 (inception).
Trendwest is a majority owned subsidiary of JELD-WEN, inc. (Parent), and TW
Holdings and Trendwest Funding are wholly-owned subsidiaries of the Parent. In
conjunction with and conditioned upon an initial public offering (IPO) of
Trendwest's common stock, as described in note 18, the Parent will transfer to
Trendwest all of the outstanding common stock of TW Holdings and Trendwest
Funding in exchange for additional shares of the common stock of Trendwest
(Consolidation Transaction).
All intercompany balances and transactions have been eliminated in
combination.
(C) UNAUDITED PRO FORMA NET INCOME PER SHARE
Unaudited pro forma net income per share for 1996 has been computed based
on the number of shares of Trendwest common stock outstanding at December 31,
1996 and the number of additional shares issued to the Parent in connection with
the Consolidation Transaction. Due to the significant impact of the
Consolidation Transaction on the number of outstanding shares of Trendwest
common stock, historical net income per share is not meaningful and is therefore
not presented. No common stock equivalents were outstanding at December 31,
1996.
(D) PRIOR PERIOD ADJUSTMENTS
The accompanying combined financial statements were prepared in connection
with the proposed IPO and present for the first time the combined results of
Trendwest, TW Holdings and Trendwest Funding. Certain adjustments were made to
conform accounting policies and to record certain prior period adjustments to
the individual entities. Prior period adjustments were made to the allowance for
doubtful accounts, gains on sales of notes receivable and recognition of revenue
on upgrade sales.
F-7
<PAGE> 62
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) RESTRICTED CASH
Restricted cash consists primarily of deposits received on sales of
Vacation Credits that are held in escrow until the applicable statutory
rescission period has expired and the related customer note receivable has been
recorded and amounts received prior to the attainment of the required 10% down
payment.
(B) ALLOWANCES FOR DOUBTFUL ACCOUNTS AND RECOURSE LIABILITY
The Company provides for estimated future losses to be incurred related to
uncollectible notes receivable outstanding and notes receivable sold with
recourse. The provision for credit losses and recourse liability is charged to
income in amounts sufficient to maintain the allowance and the recourse
liability at levels considered adequate to cover anticipated losses resulting
from liquidation of notes receivable outstanding and notes receivable sold with
recourse. The allowance for doubtful accounts and recourse liability are based
on the collection history of the receivables and are net of anticipated cost
recoveries of the underlying Vacation Credits. Management believes that all such
allowances and estimated liabilities are adequate.
(C) INVENTORIES
Inventories consist of Vacation Credits and construction in progress as
follows at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Vacation Credits......................................... $ 0 $ 7,784
Construction in progress................................. 10,594 8,463
------- -------
Total inventories.............................. $ 10,594 $ 16,247
======= =======
</TABLE>
Vacation Credits represent the costs of unsold ownership interests in
WorldMark. Resort properties are completed and ownership is contributed by the
Company to WorldMark in return for the right to sell Vacation Credits in these
properties based on the number of credits available for the properties. Credits
available are determined using a formula based on the number of user days
available as well as the relative value of each property. Vacation Credits are
carried at the lower of cost, based on the weighted average of property cost per
Vacation Credit established, or net realizable value.
Construction in progress is valued at the lower of cost or net realizable
value. Interest, taxes and other carrying costs incurred during the construction
period are capitalized. The amount of interest capitalized during the years
ended December 31, 1994, 1995 and 1996 amounted to $0, $0 and $343,
respectively.
(D) REVENUE RECOGNITION
(i) Vacation Credits
Substantially all Vacation Credits sold by the Company generate installment
notes receivable secured by an interest in the related Vacation Credits. These
notes receivable are payable in monthly installments, including interest, with
maturities up to seven years. Sales are included in revenues when at least a 10%
down payment requirement has been met and any recission period has expired.
Product costs and direct selling expenses related to a Vacation Credit sale
are recorded at the time the sale is recognized. Product costs include the cost
of land, improvements to the property including costs of amenities constructed
for the use and benefit of the Vacation Credit owners, and other direct
acquisition costs.
F-8
<PAGE> 63
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
The Company also finances sales of additional Vacation Credits to existing
owners (Upgrades) which result in the cancellation of any existing note
receivable and the issuance of a new seven-year note secured by an interest in
all Vacation Credits owned. No additional down payment is required by the
Company as long as the owner's equity interest in the original Vacation Credits
is equal to 10% of the value of all Vacation Credits, including those from the
Upgrade sale, and the customer is not delinquent in their payments on their
existing note receivable. When the Company finances an Upgrade sale and the
customer does not make an additional down payment of at least 10% of the Upgrade
sale amount, the Company uses the installment method to recognize revenue
whereby profit is recognized as a portion of each principal payment received on
the Upgrade. Revenue is fully recognized on the Upgrade sale when the cash
collected relating to the Upgrade sale totals 10% of the Upgrade sale. Cash
collected relating to a financed Upgrade sale is measured as the sum of any
additional down payment received at the time of the Upgrade sale and the
principal repayment of the new note receivable which is allocable to the Upgrade
sale. Principal repayments are allocated to the Upgrade sale component of the
new note receivable and the pre-Upgrade sale component of the new note
receivable based on the ratio of such components at the time of the Upgrade
sale.
Management fees are recognized on an accrual basis as earned.
(ii) Notes Receivable
The Company sells notes receivable to outside investors and securitizes
notes receivable through a limited liability company which is majority owned by
an independent third party who has made a substantial capital investment and has
substantial risks and rewards relating to the assets of the limited liability
company (LLC).
Gains on sales of notes receivable represent the present value of the
differential between contractual interest rates charged to borrowers on notes
receivable sold by the Company and the interest rates to be received by the
purchasers of such notes receivable, after considering the effects of estimated
prepayments and a normal servicing fee (excess servicing spread), net of
transaction costs. The Company recognizes such gains on sales of notes
receivable on the settlement date. Concurrent with recognizing such gain on
sale, the Company records a corresponding asset on its combined balance sheet in
an initial amount equal to the excess servicing spread (excess servicing asset).
Gains on the sale of a portion of notes receivable are based on the relative
fair market values of the notes receivable portions sold and retained. The
Company generally sells its notes receivable at par value.
In discounting cash flows related to notes receivable sales, the Company
discounts cash flows on its sales at the rate (12.25%) it believes a purchaser
would require as a rate of return. The Company has developed its assumptions
based on experience with its own portfolio, available market data and ongoing
consultation with its investment bankers.
Income from the differential retained is recorded in finance income using
the interest method. In addition, finance income includes interest income on
notes receivable retained by the Company. The excess servicing asset is carried
at the lower of amortized cost or net realizable value.
Currently, the carrying value of the excess servicing asset is analyzed
quarterly by the Company on a disaggregated basis to determine whether
prepayment experience has had an impact on this carrying value. Expected cash
flows of the underlying notes receivable sold are reviewed based upon current
economic conditions and the type of notes receivable originated and are revised
as necessary using the original discount rate used in calculating the gain on
sale. Losses arising from adverse prepayment experience are recognized as a
charge to earnings while favorable experience is not recognized until realized
(see note 2(d)(i)).
F-9
<PAGE> 64
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
The Company charges off notes receivable when deemed to be uncollectible.
Finance income previously accrued and unpaid is reversed.
(E) PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the following assets' estimated useful lives:
<TABLE>
<S> <C>
Building and improvements..................................... 20 to 45 years
Equipment, furniture and fixtures............................. 3 to 12 years
Leasehold improvements........................................ 2 to 5 years
</TABLE>
(F) ADVERTISING
Advertising costs are expensed as incurred and amounted to $1,783, $2,012
and $4,036 for the years ended December 31, 1994, 1995 and 1996, respectively.
(G) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
The Company is included in the consolidated tax return of the Parent. TW
Holdings filed a separate tax return for 1994. The Parent allocates the combined
current and deferred tax expense to the Company as if the Company had filed on a
stand-alone basis.
(H) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the combined financial
statements and the reported amounts of revenues and expenses during the
reporting period to prepare these combined financial statements in conformity
with generally accepted accounting principles. Actual results could differ from
those estimates and assumptions.
(I) EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS No. 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company adopted SFAS No. 121 in
the first quarter of 1996 and there was no material impact on the Company's
operations or financial position upon adoption.
F-10
<PAGE> 65
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
In June 1996, the FASB issued SFAS No. 125, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are based
on consistent application of a financial-components approach that focuses on
control. Under that approach, after a transfer of financial assets, an entity
recognizes the financial and servicing assets it controls and the liabilities it
has incurred, derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. This Statement is effective for
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996, and is to be applied prospectively. This
statement requires the Company's excess servicing asset to be measured at fair
value and reclassified as a marketable equity security accounted for in
accordance with SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities. The adoption of SFAS No. 125 on January 1, 1997 will result
in an increase in the excess servicing asset as compared to the balance at
December 31, 1996 of $584 and a corresponding increase in net income before
taxes as the Company intends to classify the excess servicing asset as a trading
security under SFAS No. 115. SFAS No. 125 will also have the impact of
increasing the gain on sale of notes receivable at the time of sale and reducing
future financing income for receivables sold after January 1, 1997.
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. SFAS
No. 128 establishes standards for computing and presenting earnings per share
and applies to entities with publicly held common stock or potential common
stock. This statement is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier application
is not permitted. The Company does not anticipate a material impact upon
adoption of this standard.
(3) MARKETABLE SECURITIES
In 1995, the Company sold marketable equity securities to the Parent. No
gain or loss was realized on this transaction.
(4) NOTES RECEIVABLE
The Company provides financing to the purchasers of Vacation Credits. The
notes resulting from sales of Vacation Credits in 1995 and 1996 bear interest at
13.9% or 14.9%, depending on method of payment, and are written with initial
terms of up to 84 months. Once a 10% down payment has been received, the Company
has no obligation under the notes to refund monies or provide further services
to members in the event membership is terminated for nonpayment of contract
obligations.
F-11
<PAGE> 66
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
The activity in the allowances for doubtful accounts, sales returns and
recourse liability is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Balances at beginning of period............... $ 2,930 $ 5,284 $ 7,964
Provision for doubtful accounts, sales returns
and recourse liability...................... 5,500 7,655 10,078
Notes receivable charged-off and sales returns
net of Vacation Credits recovered........... (3,284) (5,088) (6,873)
Recoveries.................................... 138 113 72
------- ------- -------
Balances at end of period..................... $ 5,284 $ 7,964 $11,241
======= ======= =======
Allowance for doubtful accounts and sales
returns..................................... 3,584 5,429 5,832
Allowance for recourse liability on notes
sold........................................ 1,700 2,535 5,409
------- ------- -------
$ 5,284 $ 7,964 $11,241
======= ======= =======
</TABLE>
Total notes receivable outstanding, including notes receivable sold,
amounted to $126,015 and $179,231 at December 31, 1995 and 1996, respectively.
(5) SALES OF NOTES RECEIVABLE
The Company sells an 80% interest in certain notes receivable to outside
investors primarily through a receivables transfer agreement (Agreement), as
amended on December 31, 1996, expiring June 30, 1997 with Seattle-First National
Bank and other purchasers (Investors). Under the terms of the Agreement, up to
$68,000 of receivables can be sold to the Investors and proceeds from the
collection of sold note receivables are used to purchase additional notes
receivable. The notes receivable are sold at par to yield LIBOR plus 1.5% per
annum to the Investors.
Total notes receivable sold and outstanding under this Agreement amounted
to $68,000 and $55,000 at December 31, 1995 and 1996.
The Company securitizes notes receivable by selling them to the LLC in
exchange for cash and a retained interest in the LLC. The retained interest in
the LLC entitles the Company to the excess cash flows from the LLC after
required payments to the LLC noteholders and outside investor and the payment of
related expenses.
The Investors and the LLC noteholders and the LLC outside investor have
recourse to the Company's retained interest in notes receivable sold and the LLC
under certain default provisions related primarily to the delinquency status of
the notes receivable sold. The Company's retained interest is included in notes
receivable in the accompanying combined balance sheets, and amounted to $17,000
and $26,436 at December 31, 1995 and 1996, respectively.
(6) DUE TO/FROM PARENT
The Company has an open revolving credit line with its Parent to meet
operating needs and invest excess funds. The credit line is without limit and is
payable on demand. It bears interest at prime plus 1% at December 31, 1996 on
funds borrowed and prime minus 1% on funds loaned back to the Parent.
F-12
<PAGE> 67
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(7) PROPERTY AND EQUIPMENT
Property and equipment, net, consists primarily of the Company's corporate
headquarters and leased sales offices as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------ ------
<S> <C> <C>
Land....................................................... $ 877 $ 877
Building and improvements.................................. 3,005 3,586
Equipment, furniture and fixtures.......................... 1,807 2,504
Leasehold improvements..................................... 185 336
------ ------
5,874 7,303
Less accumulated depreciation and amortization............. 1,040 1,391
------ ------
$4,834 $5,912
====== ======
</TABLE>
(8) DEFERRED GROSS PROFIT
The Company accounts for certain Upgrade sales on the installment method
prior to satisfaction of minimum down payment requirements. Information for
those transactions follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1995 1996
------ ------ -------
<S> <C> <C> <C>
Gross sales value............................... $4,229 $8,266 $15,618
------ ------ -------
Gross profit deferred........................... 1,958 3,826 7,230
Gross profit recognized......................... 1,247 2,346 4,493
------ ------ -------
Net gross profit deferred during period......... $ 711 $1,480 $ 2,737
====== ====== =======
</TABLE>
Notes receivable is presented net of deferred gross profit in the
accompanying combined balance sheets. Such deferred amounts aggregated $3,102
and $5,839 at December 31, 1995 and 1996, respectively.
(9) NOTES PAYABLE
The Company has a line of credit of $5,000 with FINOVA Capital Corporation.
The outstanding balance at December 31, 1995 and 1996 was $2,542 and $1,055,
respectively. Notes receivable are assigned to the lender and as principal
payments are received, they are applied to this loan. The agreement requires
replacement of notes that become 60 days past due and bears interest at 10.5%
per annum. The agreement also requires the Company to maintain minimum financial
ratios, restricts certain expenses and limits cash distributions. The line of
credit matures in 1997.
F-13
<PAGE> 68
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(10) INCOME TAXES
The provision for income taxes consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1994 1995 1996
------ ------ ------
<S> <C> <C> <C>
Federal:
Current........................................ $4,141 $5,218 $7,426
Deferred....................................... (936) (308) (450)
------ ------ ------
3,205 4,910 6,976
------ ------ ------
State:
Current........................................ 73 125 344
Deferred....................................... (64) (56) 28
------ ------ ------
9 69 372
------ ------ ------
Total.................................. $3,214 $4,979 $7,348
====== ====== ======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1995 and 1996 are presented below:
<TABLE>
<CAPTION>
1995 1996
------ ------
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts and sales returns........ $2,980 $4,206
Deferred gross profit.................................... 1,161 2,185
Other.................................................... 516 571
------ ------
Total deferred tax assets........................ 4,657 6,962
------ ------
Deferred tax liability:
Excess servicing asset................................... 1,807 3,375
Other assets............................................. 253 196
Property and equipment................................... 59 120
Other.................................................... 600 911
------ ------
Total deferred tax liability..................... 2,719 4,602
------ ------
Net deferred tax asset........................... 1,938 $2,360
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities, projected future taxable income,
and tax planning strategies in making this assessment.
Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company will
realize the benefits of these deferred tax assets.
F-14
<PAGE> 69
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
Income tax expense differed from the amounts computed by applying the
Federal income tax rate of 35% to pretax income as a result of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Income tax at Federal statutory rate................... 35.0% 35.0% 35.0%
State taxes, net of Federal benefit.................... 2.0 2.0 2.4
Other.................................................. .6 (.8) (.7)
---- ---- ----
37.6% 36.2% 36.7%
==== ==== ====
</TABLE>
(11) EMPLOYEE NOTES FOR COMMON STOCK
Notes accepted upon the purchase of Company common stock are secured by the
stock and bear interest at 9% and are included as a reduction to stockholders'
equity. In 1995, certain individuals exchanged their Company common stock for
common stock of the Parent and the notes were repaid.
(12) PARENT COMPANY 401(k) PLAN
The Company participates in the 401(k) plan of the Parent. Company
contributions, which are invested in Parent common stock, are at the discretion
of the Board of Directors of the Parent and totaled $945, $1,283 and $1,686 for
the years ended December 31, 1994, 1995 and 1996, respectively.
(13) INTEREST RATE CAP AGREEMENT
In March 1995, the Company entered into an interest rate cap agreement for
$92 to reduce the impact of changes in interest rates on its notes receivable
sold. The interest rate cap agreement has a notional principal amount of $31,800
on which the Company receives interest payments to the extent that LIBOR exceeds
10.125% per annum.
The interest rate cap agreement expires in April 1998. The Company is
exposed to credit loss in the event of nonperformance by the other party to the
interest rate cap agreement. However, the Company believes the risk of incurring
losses related to credit risk is remote and any losses would be immaterial. No
payments have been received by the Company under the terms of the agreement.
(14) FAIR VALUES OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures About Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized in the statement of financial condition. Fair values
are based on estimates using present value or other valuation techniques in
cases where quoted market prices are not available. Those techniques are
significantly affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair value estimates
cannot be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. SFAS No. 107
excludes certain financial instruments and all nonfinancial instruments from its
disclosure requirements. Accordingly, the aggregate fair value amounts presented
do not represent the underlying value of the Company.
F-15
<PAGE> 70
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
Estimated fair values, carrying values and various methods and assumptions
used in valuing the Company's financial instruments 1996 are set forth below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1995 1996
---------------------- ----------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
VALUE VALUE VALUE VALUE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash(a).......................... $ 135 $ 135 $ 93 $ 93
Restricted cash(a)............... 381 381 709 709
Notes receivable(a).............. 41,263 41,263 46,616 46,616
Excess servicing asset(b)........ 6,451 7,323 10,839 11,423
Financial liabilities:
Due to Parent(c)................. 22,284 22,284 21,841 21,841
Allowance for recourse liability
on notes sold(a).............. 2,535 2,535 5,409 5,409
Notes payable(c)................. 2,542 2,542 1,055 1,055
</TABLE>
- ---------------
(a) The carrying value, prior to consideration of deferred gross profit in the
case of notes receivable, is considered to be a reasonable estimate of fair
value.
(b) Fair value is determined using estimated discounted future cash flows taking
into consideration anticipated prepayment rates.
(c) The carrying value reported approximates fair value due to the variable
interest rates charged on the borrowings.
Because no market exists for a portion of the financial instruments, fair
value estimates may be based on judgments regarding future instruments and other
factors. These estimates are subjective in nature and involve uncertainties and
matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
The fair market value of the interest rate cap agreement is based on
current interest rates and is estimated to be $0 at December 31, 1995 and 1996.
F-16
<PAGE> 71
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(15) RELATED PARTY TRANSACTIONS
(A) NOTES RECEIVABLE
The Company, on an ongoing basis, acquires from and sells notes receivable
to related parties. A summary of these transactions for the years ended December
31 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
------ ------- -------
<S> <C> <C> <C>
Sale of notes receivable:
Members of the Board of Directors of the
Parent (at face value, full recourse)..... $9,714 $ 3,905 $ 3,350
I&I Holdings, a subsidiary of the Parent (at
face value, full recourse)................ 13 1,321 232
Parent Foundation (at amount to yield 10%
interest earnings, full recourse)......... 297 191 211
Purchases of notes receivable:
Eagle Crest Partners, Ltd., a subsidiary of
the Parent (at face value, full
recourse)................................. 6,005 11,305 8,993
Running Y Resorts, Ltd., a subsidiary of the
Parent (at face value, full recourse)..... -- -- 2,157
</TABLE>
With respect to notes receivable sold to members of the Board of Directors
of the Parent and subsidiary of the Parent, the Company services such
receivables without compensation.
The outstanding balance of notes receivable sold with full recourse to
related parties amounted to $18,747 and $18,512 at December 31, 1995 and 1996,
respectively.
(B) WORLDMARK
The Company manages the resort properties transferred to WorldMark under
the terms of a management agreement which is subject to annual approval by the
members of WorldMark. Under the terms of the management agreement, the Company
receives a management fee equal to the lesser of 15% of WorldMark's expenditures
or net profit of WorldMark and is reimbursed for certain expenses. In addition,
the Company is responsible for paying annual dues on Vacation Credits which it
owns prior to their sale to customers. A summary of these transactions for the
years ended December 31 follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
----------------------
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
WorldMark:
Management fee income................................ $173 $ 747 $1,103
Dues expense incurred by Trendwest................... 137 512 273
Reimbursed salaries.................................. 528 1,533 3,103
Other reimbursed expenses............................ 170 297 353
</TABLE>
F-17
<PAGE> 72
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(C) PARENT
In addition to the note payable to Parent described in note 6, the Company
reimburses the Parent for administrative services received and its share of
insurance expenses. Also, the Parent is named as the master servicer under the
terms of certain sales of notes receivable and receives a servicing fee of 1.75%
per annum of the sold receivables to service the receivable. The Parent
subcontracts the servicing to Trendwest for a servicing fee of 1.25% per annum
of the sold receivable balance and Trendwest, in turn, subcontracts components
of the servicing to a third-party servicer, SAGE. A summary of these
transactions with Parent for the years ended December 31 follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Parent:
Interest income.................................. $167 $ -- $ 451
Interest expense................................. 114 1,993 2,564
Insurance expense................................ 786 879 1,304
Administrative service expense................... 544 723 913
Servicing fee expense, net....................... 604 1,163 1,008
</TABLE>
(17) COMMITMENTS AND CONTINGENCIES
(A) PURCHASE COMMITMENTS
The Company routinely enters into purchase agreements with various
developers to acquire and build resort properties. At December 31, 1996, the
Company has outstanding purchase commitments of $28,077 related to four
properties under development.
(B) TAX CONTINGENCY
The Internal Revenue Service (IRS) is currently auditing the 1991, 1992 and
1993 tax returns of Trendwest, Inc., the former parent of the Company. The
Company is a party to this matter. The IRS has issued a statutory Notice of
Deficiency of tax and interest totaling approximately $9,300. The deficiency
relates primarily to the disallowance of all resort property costs. The Company
believes that this matter is close to resolution and that the amount of any
actual deficiency will not be material to the Company's financial condition,
results of operations or liquidity.
(C) LITIGATION
The Company is involved in various claims and lawsuits arising in the
ordinary course of business. Management believes the outcome of these matters
will not have a material adverse effect on the Company's financial position,
results of operations or liquidity.
F-18
<PAGE> 73
TRENDWEST RESORTS, INC.
AND CERTAIN AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS)
(D) LEASE COMMITMENTS
The Company has various operating lease agreements, primarily for sales
offices. These obligations generally have remaining noncancelable terms of five
years or less. Future minimum lease payments are as follows for the years ending
December 31:
<TABLE>
<CAPTION>
<S> <C>
1997................................................ $1,255
1998................................................ 1,044
1999................................................ 922
2000................................................ 807
2001................................................ 363
</TABLE>
Rental expense amounted to $877, $1,126 and $1,426 for the years ended
December 31, 1994, 1995 and 1996, respectively.
(18) SUBSEQUENT EVENT
On May 8, 1997 the Board of Directors of Trendwest authorized the filing of
a registration statement with the Securities and Exchange Commission and the
issuance of 10,120 shares of common stock to Parent in conjunction with the
Consolidation Transaction. In addition, the Board amended the articles of
incorporation, subject to stockholder approval, to increase the number of
authorized shares of common stock to 90,000,000 and to establish preferred stock
with 10,000,000 shares authorized and terms to be determined by the Board.
The Board also adopted the 1997 Stock Option Plan (the "1997 Plan") and
authorized up to 5% of the number of common stock outstanding from time to time
for issuance thereunder.
F-19
<PAGE> 74
=========================================================
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company, by the Selling
Stockholder or by any of the Underwriters. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any security other than
the registered securities to which this Prospectus relates or any offer to any
person in any jurisdiction where such an offer would be unlawful. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein is correct as
of any time subsequent to the date hereof.
--------------------------
TABLE OF CONTENTS
--------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary...................... 3
Risk Factors............................ 10
Use of Proceeds......................... 16
Dividend Policy......................... 16
Capitalization.......................... 17
Dilution................................ 18
Selected Combined Financial and
Operating Data........................ 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................ 21
Business................................ 25
Management.............................. 39
Certain Transactions.................... 43
Principal and Selling Stockholders...... 46
Description of Capital Stock............ 46
Certain Provisions of Oregon Law and of
Trendwest's Articles of Incorporation
and Bylaws............................ 47
Shares Eligible For Future Sale......... 49
Underwriting............................ 50
Legal Matters........................... 51
Experts................................. 51
Change in Accountants................... 52
Additional Information.................. 53
Index to Combined Financial
Statements............................ F-1
</TABLE>
Until , 1997 (25 days after the date of this Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the obligation of dealers to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotment or
subscriptions.
=========================================================
=========================================================
SHARES
[LOGO]
TRENDWEST RESORTS, INC.
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
MONTGOMERY SECURITIES
SALOMON BROTHERS INC
, 1997
=========================================================
<PAGE> 75
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, in connection with the sale and
distribution of the shares of Common Stock being registered hereby. All of such
costs and expenses are estimates, except the Commission registration fee and the
NASD filing fee, and all of such costs are payable by the Company.
<TABLE>
<S> <C>
Commission registration fee....................................... $
NASD filing fee...................................................
Accounting fees and expenses......................................
Blue Sky fees and expenses........................................
Legal fees and expenses...........................................
Printing and engraving expenses...................................
Transfer agent fees...............................................
Miscellaneous expenses............................................
--------
Total................................................... $
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 60.387 through 60.414 of the Oregon Business Corporation Act
authorize a court to award, or a corporation's board of directors to grant,
indemnification to directors and officers on terms sufficiently broad to permit
indemnification under certain circumstances for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article X of the
Registrant's Articles of Incorporation (Exhibit 3.1 hereto) provide for
indemnification of the Registrant's directors to the maximum extent permitted by
Oregon law. Article X of the Registrant's Articles of Incorporation also permits
the Registrant's board of directors to indemnify the Registrant's officers,
employees and agents up to the maximum extent permitted by Oregon law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in such capacity pursuant to a liability
insurance policy maintained by the Company for such purpose.
Section 60.047(2)(d) of the Oregon Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
stockholders for monetary damages for acts or omissions as a director, except in
the event of (i) a breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) an unlawful
corporate distribution, or (iv) a transaction from which the director derived an
improper personal benefit. Article IX of the Registrant's Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Oregon law, such limitations on a director's liability to the Registrant and
its stockholders.
The proposed form of Underwriting Agreement (Exhibit 1.1 hereto) contains
certain provisions regarding the indemnification of officers and directors of
the Registrant by the Underwriters.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction
II-1
<PAGE> 76
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In June 1995, the Registrant sold the indicated number of shares of its
Common Stock to the following individuals who were directors or executive
officers of the Registrant:
<TABLE>
<CAPTION>
PURCHASE
NAME NUMBER OF SHARES PRICE
---------------------------------------- ---------------- --------
<S> <C> <C>
William F. Peare 875 $303,210
Jerol Andres 875 303,210
Jeffery Sites 175 17,900
Michael Moyer 105 10,050
</TABLE>
Payments for all of these sales were made in the form of a promissory note
with interest at 9% per annum. All of the promissory notes have been fully paid.
These sales were exempt under Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement among the Registrant, the Selling Stockholder
and the Underwriters.
3.1 Form of Amended and Restated Articles of Incorporation of the Registrant,
dated , 1997.
3.2 Form of Amended and Restated Bylaws of the Registrant, dated ,
1997.
*5.1 Opinion of Foster Pepper & Shefelman PLLC.
10.1 Management Agreement (Fourth Amended) between the Registrant and WorldMark the
Club ("WorldMark"), dated September 30, 1994.
10.2 Software Support and Maintenance Agreement between the Registrant and Sage
Systems, Inc. ("Sage"), dated , 1994.
10.3 Service Agreement between the Registrant and Sage, dated January 1, 1996.
10.4 Software Transfer Agreement between the Registrant, Sage and James McBride,
Sr., dated August, 1994.
10.5 Escrow Agreement between the Registrant, Club Esprit (predecessor to
WorldMark) and Sage, dated as of October 25, 1990.
10.6 Form of WorldMark Retail Installment Contract Vacation Owner Agreement.
10.7 Indenture among the Registrant, TRI Funding Company I, L.L.C. and LaSalle
National Bank, dated as of March 1, 1996.
10.8 Servicing Agreement among the Registrant, TRI Funding Company I, L.L.C., Sage
and LaSalle National Bank, dated as of March 1, 1996.
10.9 Purchase and Sale Agreement among the Registrant, Trendwest Funding I, Inc.,
TWH Funding I, Inc. and TRI Funding Company I, L.L.C., dated March 1, 1996.
10.10 Receivables Purchase Agreement among the Registrant, TW Holdings, Inc. and
Trendwest Funding I, Inc., dated March 1, 1996.
10.11 Loan and Security Agreement between the Registrant and Greyhound Financial
Corporation, dated as of May 5, 1993.
10.12 Receivables Purchase Agreement between Registrant and TW Holdings, Inc., dated
December 1, 1993.
</TABLE>
II-2
<PAGE> 77
<TABLE>
<C> <S>
10.13 Receivables Purchase Agreement between Eagle Crest Partners, Ltd. and TW
Holdings, Inc., dated December 1, 1993.
10.14 Receivables Transfer Agreement among TW Holdings, Inc., Seattle-First National
Bank and JELD-WEN, inc. ("Jeld-Wen"), dated as of December 1, 1993.
10.15 Nonexclusive Limited Assignment among the Registrant, Eagle Crest Partners,
Ltd. and WorldMark, dated September 20, 1996.
10.16 Nonexclusive Limited Assignment among the Registrant, Running Y, Inc. and
WorldMark dated September 20, 1996.
10.17 Purchase Agreement among the Registrant, Eagle Crest Partnership, Ltd.,
Roderick C. Wendt and Richard L. Wendt, dated December 30, 1992.
10.18 Purchase Agreement among the Registrant, Roderick C. Wendt and Richard L.
Wendt, dated April 1, 1993.
10.19 Purchase Agreement between the Registrant and Jeld-Wen Foundation, dated March
13, 1992.
10.20 Purchase Agreement between the Registrant and Jeld-Wen, dated March 15, 1993.
10.21 Purchase Agreement between the Registrant and Jeld-Wen, dated September 30,
1993.
10.22 Purchase Agreement between the Registrant and Jewel W. Kintzinger, dated
October 12, 1993.
10.23 Servicing Escrow Agreement between Jewel Kintzinger, the Registrant and Sage,
dated October 12, 1993.
10.24 Articles of Incorporation of WorldMark, the Club, dated December 10, 1992.
10.25 Bylaws of WorldMark, dated December 2, 1994.
10.26 Form of Employment Agreement between William F. Peare and the Registrant.
10.27 Form of Employment Agreement between Jeffery P. Sites and the Registrant.
10.28 Trendwest Resorts, Inc. 1997 Employee Stock Option Plan.
16.1 Letter re change in Certifying Accountant.
*16.2 Letter re change in Certifying Accountant.
21.1 List of all Subsidiaries of the Registrant.
*23.1 Consent of Foster Pepper & Shefelman PLLC.
23.2 Consent of KPMG Peat Marwick LLP, Independent Auditors.
24.1 Power of Attorney from officers and directors (contained on signature page).
</TABLE>
- ---------------
* To be filed by amendment
(b) Financial Statement Schedules
None. Schedules are omitted because of the absence of the conditions under
which they are required or because the information required by such omitted
schedules is set forth in the financial statements or the notes thereto.
ITEM 17. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrants pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
II-3
<PAGE> 78
securities being registered, the registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
them is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(b) The registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) The registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter
to permit prompt delivery to each purchaser.
II-4
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Trendwest Resorts, Inc. has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Bellevue, State of Washington, on May 9, 1997.
TRENDWEST RESORTS, INC.
By: /s/ JEFFERY P. SITES
------------------------------------
Jeffery P. Sites
Executive Vice President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints and
hereby authorizes William F. Peare and Jeffery P. Sites, and either of them,
with the full power of substitution, as attorney-in-fact to execute in the name
and on behalf of each person, individually and in each capacity stated below,
and to file any and all amendments to this Registration Statement, including any
and all post-effective amendments, and any related registration statement that
is to be effective upon filing pursuant to Rule 462(b).
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<C> <C> <S>
/s/ WILLIAM F. PEARE President, Chief Executive Officer May 9, 1997
- ------------------------------------------ and Director (Principal Executive
William F. Peare Officer)
/s/ JEFFERY P. SITES Executive Vice President, May 9, 1997
- ------------------------------------------ Chief Operating Officer and
Jeffery P. Sites Director
/s/ GARY A. FLORENCE Vice President, Treasurer May 9, 1997
- ------------------------------------------ and Chief Financial Officer
Gary A. Florence (Principal Financial Officer)
/s/ JEROL E. ANDRES Director May 9, 1997
- ------------------------------------------
Jerol E. Andres
/s/ DOUGLAS KINTZINGER Director May 9, 1997
- ------------------------------------------
Douglas Kintzinger
/s/ RODERICK C. WENDT Director May 9, 1997
- ------------------------------------------
Roderick C. Wendt
</TABLE>
II-5
<PAGE> 80
EXHIBIT INDEX
(a) Exhibits
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- --------------------------------------------------------------------- ------------
<C> <S> <C>
*1.1 Form of Underwriting Agreement among the Registrant, the Selling
Stockholder and the Underwriters.....................................
3.1 Form of Amended and Restated Articles of Incorporation of the
Registrant, dated , 1997.................................
3.2 Form of Amended and Restated Bylaws of the Registrant, dated
, 1997...................................................
*5.1 Opinion of Foster Pepper & Shefelman PLLC............................
10.1 Management Agreement (Fourth Amended) between the Registrant and
WorldMark the Club ("WorldMark"), dated September 30, 1994...........
10.2 Software Support and Maintenance Agreement between the Registrant and
Sage Systems, Inc. ("Sage"), dated , 1994..................
10.3 Service Agreement between the Registrant and Sage, dated January 1,
1996.................................................................
10.4 Software Transfer Agreement between the Registrant, Sage and James
McBride, Sr., dated August, 1994.....................................
10.5 Escrow Agreement between the Registrant, Club Esprit (predecessor to
WorldMark) and Sage, dated as of October 25, 1990....................
10.6 Form of WorldMark Retail Installment Contract Vacation Owner
Agreement............................................................
10.7 Indenture among the Registrant, TRI Funding Company I, L.L.C. and
LaSalle National Bank, dated as of March 1, 1996.....................
10.8 Servicing Agreement among the Registrant, TRI Funding Company I,
L.L.C., Sage and LaSalle National Bank, dated as of March 1, 1996....
10.9 Purchase and Sale Agreement among the Registrant, Trendwest Funding
I, Inc., TWH Funding I, Inc. and TRI Funding Company I, L.L.C., dated
March 1, 1996........................................................
10.10 Receivables Purchase Agreement among the Registrant, TW Holdings,
Inc. and Trendwest Funding I, Inc., dated March 1, 1996..............
10.11 Loan and Security Agreement between the Registrant and Greyhound
Financial Corporation, dated as of May 5, 1993.......................
10.12 Receivables Purchase Agreement between Registrant and TW Holdings,
Inc., dated December 1, 1993.........................................
10.13 Receivables Purchase Agreement between Eagle Crest Partners, Ltd. and
TW Holdings, Inc., dated December 1, 1993............................
10.14 Receivables Transfer Agreement among TW Holdings, Inc., Seattle-First
National Bank and JELD-WEN, inc. ("Jeld-Wen"), dated as of December
1, 1993..............................................................
10.15 Nonexclusive Limited Assignment among the Registrant, Eagle Crest
Partners, Ltd. and WorldMark, dated September 20, 1996...............
10.16 Nonexclusive Limited Assignment among the Registrant, Running Y, Inc.
and WorldMark dated September 20, 1996...............................
10.17 Purchase Agreement among the Registrant, Eagle Crest Partnership,
Ltd., Roderick C. Wendt and Richard L. Wendt, dated December 30,
1992.................................................................
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------- --------------------------------------------------------------------- ------------
<C> <S> <C>
10.18 Purchase Agreement among the Registrant, Roderick C. Wendt and
Richard L. Wendt, dated April 1, 1993................................
10.19 Purchase Agreement between the Registrant and Jeld-Wen Foundation,
dated March 13, 1992.................................................
10.20 Purchase Agreement between the Registrant and Jeld-Wen, dated March
15, 1993.............................................................
10.21 Purchase Agreement between the Registrant and Jeld-Wen, dated
September 30, 1993...................................................
10.22 Purchase Agreement between the Registrant and Jewel W. Kintzinger,
dated October 12, 1993...............................................
10.23 Servicing Escrow Agreement between Jewel Kintzinger, the Registrant
and Sage, dated October 12, 1993.....................................
10.24 Articles of Incorporation of WorldMark, the Club, dated December 10,
1992.................................................................
10.25 Bylaws of WorldMark, dated December 2, 1994..........................
10.26 Form of Employment Agreement between William F. Peare and the
Registrant...........................................................
10.27 Form of Employment Agreement between Jeffery P. Sites and the
Registrant...........................................................
10.28 Trendwest Resorts, Inc. 1997 Employee Stock Option Plan..............
16.1 Letter re change in Certifying Accountant............................
*16.2 Letter re change in Certifying Accountant............................
21.1 List of all Subsidiaries of the Registrant...........................
*23.1 Consent of Foster Pepper & Shefelman PLLC............................
23.2 Consent of KPMG Peat Marwick LLP, Independent Auditors...............
24.1 Power of Attorney from officers and directors (contained on signature
page)................................................................
</TABLE>
- ---------------
* To be filed by amendment
<PAGE> 1
EXHIBIT 3.1
SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TRENDWEST RESORTS, INC.
ARTICLE I
NAME
The name of this corporation is Trendwest Resorts, Inc. (the "Corporation").
ARTICLE II
PURPOSES AND POWERS
The Corporation is organized to engage in any lawful activity for
which a corporation may be organized under the Oregon Business Corporation Act,
including, but not limited to, the acquisition and sale of credits for
participation in an internal ownership program. The Corporation will have the
same powers as an individual to do all things necessary or convenient to carry
out its business and affairs, including but not limited to, the powers
specified in the Oregon Business Corporation Act or which may be hereafter
granted by such law.
ARTICLE III
AUTHORIZED CAPITAL STOCK
A. Authorized Classes of Shares. The Corporation may issue
100,000,000 shares of stock ("Capital Stock") divided into two classes as
follows:
90,000,000 shares of common stock ("Common Stock").
10,000,000 shares of preferred stock ("Preferred Stock"). The
Preferred Stock may be further divided into one or more series of Preferred
Stock. Each series of Preferred Stock will have the preferences, limitations
and relative rights as may be set forth for such series either in these
Articles or in an amendment to these Articles ("Preferred Stock Designation").
A Preferred Stock Designation may be adopted either by action of the Board of
Directors of the Corporation pursuant to Section G of this Article III or by
action of the shareholders of the Corporation; and
90,000,000 shares of common stock ("Common Stock").
-1-
<PAGE> 2
Except as may otherwise be provided in a Preferred Stock Designation,
all shares of a class will have preferences, limitations and relative rights
identical to those of all other shares of the same class. All shares of a
series of Preferred Stock will have preferences, limitations and relative
rights identical to those of all other shares of that series of Preferred
Stock.
B. Voting Rights. The Corporation's Capital Stock will have
voting rights as follows:
1. Common Stock Voting Rights. Subject to the voting
rights, if any, of any Preferred Stock that may be outstanding, the
outstanding shares of Common Stock will (a) each have one (1) vote,
(b) vote together as a single voting group and (c) together have
unlimited voting rights.
2. Preferred Stock Voting Rights. Except as otherwise
provided by the Oregon Business Corporation Act or in a Preferred
Stock Designation, each share of Preferred Stock will, on each matter
which that series of Preferred Stock is entitled to vote, either have
(a) one (1) vote if that series of Preferred Stock is not by its terms
convertible into Common Stock, or (b) if that series of Preferred
Stock is convertible into Common Stock, (i) one (1) vote for each
share of Common Stock which that series of Preferred Stock may be
converted into as of the record date for the meeting at which the vote
is to be taken and (ii) the right to vote together with shares of the
Common Stock as a single voting group.
3. Nonvoting Preferred Stock. Shares of any series of
Preferred Stock which are designated as being "nonvoting" will
nonetheless have such voting rights as are required by the Oregon
Business Corporation Act.
4. Noncumulative Voting for Directors. The holders of
shares of Common Stock and the holders of shares of any series of
Preferred Stock which is entitled to vote with respect to the election
of directors will not have the right to cumulate votes in the election
of directors.
5. Quorum at Shareholder Meetings. For all meetings of
shareholders, one-third of the votes entitled to be cast by each
voting group with respect to a matter shall constitute a quorum of
that voting group for action on that matter.
6. Special Meeting of Shareholders. Special meetings of
the shareholders of the Corporation may only be called by (a) a
majority of the Board of Directors of the Corporation, (b) the
President of the Corporation, or (c) a written demand by shareholders
of record holding shares with at least 10% of the votes entitled to be
cast on any matter proposed to be considered at the special meeting.
C. Dividends. Subject to any priority or participating rights of
any Preferred Stock that may be outstanding, the holders of Common Stock will
be entitled to receive, out of any legally available assets of the Corporation,
any dividends declared by the Board of Directors of the Corporation. Except as
may otherwise be provided in a Preferred Stock Designation, the
-2-
<PAGE> 3
Board of Directors of the Corporation will have the sole authority and
discretion to determine the time, amount and terms of payment for any dividend
which may be declared. Nothing in these Articles will be construed as
obligating the Board of Directors of the Corporation to declare a dividend at
any time, even though the Corporation may have assets legally available to pay
a dividend.
D. Redemption. Subject to any provision to the contrary
contained in any Preferred Stock Designation, the Corporation may repurchase
all or any of its outstanding shares of Common Stock or Preferred Stock even
though the distribution made to effect that repurchase would cause the
difference between the Corporation's total assets and its total liabilities to
be less than the amount that would be needed to satisfy the preferential
liquidation rights of all outstanding shares of classes or series of a class
with liquidation rights that are prior to those of the shares being repurchased
if the Corporation were to be liquidated at the time of such repurchase.
E. Liquidation. In liquidating, dissolving or winding up the
Corporation, the Board of Directors must first discharge or make adequate
provision for discharging all liabilities of the Corporation. The remaining
net assets of the Corporation shall be distributed to the holders of the Common
Stock according to their respective share holdings, subject to the priority and
participating rights of any Preferred Stock that may be outstanding.
F. Preemptive Rights. No holder of any shares of Common Stock or
Preferred Stock will be entitled to any preemptive right to purchase or
subscribe for any unissued or treasury shares of the Corporation.
G. Preferences, Limitations and Relative Rights of Preferred
Stock. The Board of Directors of the Corporation is expressly authorized to,
from time to time by resolution duly adopted, designate the preferences,
limitations and relative rights of one or more series of Preferred Stock. A
Preferred Stock Designation by the Board of Directors may set forth, with
respect to the shares of the series of Preferred Stock so designated, the
following preferences, limitations and relative rights:
1. Voting. The voting rights of the shares of that
series of Preferred Stock, including whether the shares have special,
conditional or limited voting rights. Alternatively, the Preferred
Stock Designation may include a statement to the effect that the
shares of that series of Preferred Stock are "nonvoting" except to the
extent voting rights are required by the Oregon Business Corporation
Act.
2. Dividends. The dividend rate and preference, if any,
of the shares of that series of Preferred Stock. The Preferred Stock
Designation will also state (a) whether the dividend rights of shares
of that series of Preferred Stock are cumulative, noncumulative or
partially cumulative and (b) whether or not the shares of that series
of Preferred Stock will participate in any dividends that may be
declared with respect to the Common Stock.
-3-
<PAGE> 4
3. Liquidations. The amount of the liquidation
preference, if any, of the shares of that series of Preferred Stock.
The Preferred Stock Designation will also state whether or not and, if
so, when the shares of that series of Preferred Stock will participate
with the Common Stock in any liquidating distributions.
4. Redemption. Whether the shares of that series of
Preferred Stock are redeemable at the option of the Corporation, at
the option of the holder of the shares or another person or upon the
occurrence of a designated event and whether the redemption price for
the shares of that series of Preferred Stock will be a designated
amount or determined by a designated formula or by reference to an
extrinsic event or extrinsic data, whether the redemption price for
the shares of such series of Preferred Stock will be paid in cash,
indebtedness or other property. The Preferred Stock Designation will
also state (a) the terms and conditions, if any, of any redemption,
(b) the procedures for effecting any redemption and (c) whether or not
and, if so, where and in what manner a sinking fund must be created by
the Corporation for the purpose of funding any redemption.
5. Conversion. Whether the shares of that series of
Preferred Stock are convertible at the option of the Corporation, at
the option of the holder of the shares or another person or upon the
occurrence of a designated event into other securities of the
Corporation in a designated amount or in an amount determined by a
designated formula or by reference to an extrinsic event or extrinsic
data. The Preferred Stock Designation will also state the terms and
conditions of the conversion, if any, and the procedures for effecting
such a conversion.
6. Other Terms. Such other preferences, limitations and
relative rights as the Board of Directors of the Corporation may
determine.
Every Preferred Stock Designation must identify that series of
Preferred Stock in a manner that will distinguish that series from all other
series of Preferred Stock and from the undesignated Preferred Stock. The
Preferred Stock Designation must also set forth the number of shares to be
included in that series. All shares of that series that are thereafter
redeemed, converted, or, if so provided in the Preferred Stock Designation,
remain unissued on a designated date or on the occurrence of an event will
cease to be of that series and will automatically become undesignated Preferred
Stock.
Any Preferred Stock Designation adopted by the Board of Directors of
the Corporation pursuant to this Section G of Article III will constitute
articles of amendment to these Articles of Incorporation and will become
effective, without shareholder action, upon filing as prescribed by the Oregon
Business Corporation Act. No shares of Preferred Stock or of a series of
Preferred Stock may be issued by the Corporation prior to the filing of
articles of amendment determining the preferences, limitations and relative
rights of such shares.
-4-
<PAGE> 5
ARTICLE IV
REGISTERED AGENT AND OFFICE AND ADDRESS FOR NOTICES
The registered agent of the Corporation is ___________________ and the
street address of the registered office and mailing address of the registered
agent are ___________________________________________________. The address
where the Secretary of State may mail notices is ______________________,
______________________________.
ARTICLE V
BOARD OF DIRECTORS
Effective at the first annual meeting of shareholders following the
filing of these Amended and Restated Articles of Incorporation, the board of
directors shall be divided into three classes: Class I, Class II, and Class
III. Such classes shall be as nearly equal in number of directors as possible.
Each director shall serve for a term ending at the third annual shareholders'
meeting following the annual meeting at which such director was elected;
provided, however, that the directors first elected to Class I shall serve for
a term ending at the annual meeting to be held in the year following the first
election of directors by classes, the directors first elected to Class II shall
serve for a term ending at the annual meeting to be held in the second year
following the first election of directors by classes, and the directors first
elected to Class III shall serve for a term ending at the annual meeting to be
held in the third year following the first election of directors by classes.
ARTICLE IX
LIMITATIONS ON LIABILITY OF DIRECTORS
No director of the Corporation is personally liable to the Corporation
or its shareholders for monetary damages for conduct as a director, except for
the following:
(a) Any breach of the director's duty of loyalty to the
Corporation or its shareholders;
(b) Acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law;
(c) Any distribution to shareholders that is unlawful under the
Oregon Business Corporation Act or successor statute; or
(d) Any transaction from which the director derived an improper
personal benefit.
-5-
<PAGE> 6
This Article does not limit or eliminate the liability of a director
for any act or omission occurring before the effective date of this Article.
No amendment to or repeal of this Article may make any director of the
Corporation personally liable to the Corporation or its shareholders for
monetary damages for any act or omission as a director occurring before the
effective date of that amendment or repeal.
This Article is intended to limit the liability of any director of the
Corporation to the greatest extent authorized under the Oregon Business
Corporation Act. Any further limitation on the liability of directors
authorized under any amendment to the Oregon Business Corporation Act is
incorporated into this Article on the effective date of that amendment.
ARTICLE X
INDEMNIFICATION
A. Non-Derivative Actions. Subject to the provisions of Sections
C, E and F below, the Corporation shall indemnify any person who was or is a
party to or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative, (including all appeals) (other than an action by or in the
right of the Corporation) by reason of or arising from the fact that the person
is or was a director or officer of the Corporation or one of its subsidiaries,
or is or was serving at the request of the Corporation as a director, officer,
partner, or trustee of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise, against
reasonable expenses (including attorney's fees), judgments, fines, penalties,
excise taxes assessed with respect to any employee benefit plan and amounts
paid in settlement actually and reasonably incurred by the person to be
indemnified in connection with such action, suit or proceeding if the person
acted in good faith, did not engage in intentional misconduct, and, with
respect to any criminal action or proceeding, did not know the conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith or, with respect to any criminal action or proceeding, that
the person knew that the conduct was unlawful.
B. Derivative Actions. Subject to the provisions of Sections C,
E and F below, the Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit (including all appeals) by or in the right of the Corporation to
procure a judgment in its favor by reason of or arising from the fact that the
person is or was a director or officer of the Corporation or one of its
subsidiaries, or is or was serving at the request of the Corporation as a
director, officer, partner, or trustee of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against reasonable expenses (including attorneys' fees) actually
incurred by the person to be indemnified in connection with the defense or
settlement of such action or suit if the person acted in good faith, provided,
however, that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be
-6-
<PAGE> 7
liable for deliberate misconduct in the performance of that person's duty to
the Corporation, for any transaction in which the person received an improper
personal benefit, for any breach of the duty of loyalty to the Corporation, or
for any distribution to shareholders which is unlawful under the Oregon
Business Corporation Act, or successor statute, unless and only to the extent
that the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the court shall deem proper.
C. Determination of Right to Indemnification in Certain Cases.
Subject to the provisions of Sections E and F below, indemnification under
Sections A and B of this Article shall not be made by the Corporation unless it
is expressly determined that indemnification of the person who is or was an
officer or director, or is or was serving at the request of the Corporation as
a director, officer, partner, or trustee of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, is proper in the circumstances because the person has met the
applicable standard of conduct set forth in Sections A or B. That
determination may be made by any of the following:
(a) By the Board of Directors by majority vote of a
quorum consisting of directors who are not or were not parties to the action,
suit or proceeding;
(b) If a quorum cannot be obtained under paragraph (a) of
this subsection, by majority vote of a committee duly designated by the Board
of Directors consisting solely of two or more directors not at the time parties
to the action, suit or proceeding (directors who are parties to the action,
suit or proceeding may participate in designation of the committee);
(c) By special legal counsel selected by the Board of
Directors or its committee in the manner prescribed in (a) or (b) or, if a
quorum of the Board of Directors cannot be obtained under (a) and a committee
cannot be designated under (b) the special legal counsel shall be selected by
majority vote of the full Board of Directors, including directors who are
parties to the action, suit or proceeding;
(d) If referred to them by Board of Directors of the
Corporation by majority vote of a quorum (whether or not such quorum consists
in whole or in part of directors who are parties to the action, suit or
proceeding), by the shareholders; or
(e) By a court of competent jurisdiction.
D. Indemnification of Persons Other than Officers or Directors.
Subject to the provisions of Section F, in the event any person not entitled to
indemnification under Sections A and B of this Article was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding of a type referred to in Sections A or B of this Article by
reason of or arising from the fact that such person is or was an employee or
agent (including an attorney) of the Corporation or one of its subsidiaries, or
is or was serving at the request of the Corporation as an employee or agent
(including an attorney) of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan or other
-7-
<PAGE> 8
enterprise, the Board of Directors of the Corporation by a majority vote of a
quorum (whether or not such quorum consists in whole or in part of directors
who were parties to such action, suit or proceeding) or the stockholders of the
Corporation by a majority vote of the outstanding shares upon referral to them
by the Board of Directors of the Corporation by a majority vote of a quorum
(whether or not such quorum consists in whole or in part of directors who were
parties to such action, suit or proceeding) may, but shall not be required to,
grant to such person a right of indemnification to the extent described in
Sections A or B of this Article as if the person were acting in a capacity
referred to therein, provided that such person meets the applicable standard of
conduct set forth in such Sections. Furthermore, the Board of Directors may
designate by resolution in advance of any action, suit or proceeding, those
employees or agents (including attorneys) who shall have all rights of
indemnification granted under Sections A and B of this Article.
E. Successful Defense. Notwithstanding any other provision of
Sections A, B, C or D of this Article, but subject to the provisions of Section
F, to the extent a director, officer, or employee is successful on the merits
or otherwise in defense of any action, suit or proceeding referred to in
Sections A, B or D of this Article, or in defense of any claim, issue or matter
therein, that person shall be indemnified against expenses (including attorneys
fees) actually and reasonably incurred by him in connection therewith.
F. Condition Precedent to Indemnification Under Sections A, B, D
or E. Any person who desires to receive the benefits otherwise conferred by
Sections A, B, D or E of this Article shall promptly notify the Corporation
that the person has been named a defendant to an action, suit or proceeding of
a type referred to in Sections A, B, D, or E and intends to rely upon the right
of indemnification described in Sections A, B, D or E of this Article. The
notice shall be in writing and mailed, via registered or certified mail, return
receipt requested, to the President of the Corporation at the executive offices
of the Corporation or, in the event the notice is from the President, to the
registered agent of the Corporation. Failure to give the notice required
hereby shall entitle the Board of Directors of the Corporation by a majority
vote of a quorum (consisting of directors who, insofar as indemnity of officers
or directors is concerned, were not parties to such action, suit or proceeding,
but who, insofar as indemnity of employees or agents is concerned, may or may
not have been parties) or, if referred to them by the Board of Directors of the
Corporation by a majority vote of a quorum (consisting of directors who,
insofar as indemnity of officers or directors is concerned, were not parties to
such action, suit or proceeding, but who, insofar as indemnity of employees or
agents is concerned, may or may not have been parties), the stockholders of the
Corporation by a majority of the votes entitled to be cast by holders of shares
of the Corporation's stock which have unlimited voting rights to make a
determination that such a failure was prejudicial to the Corporation in the
circumstances and that, therefore, the right to indemnification referred to in
Sections A, B or D of this Article shall be denied in its entirety or reduced
in amount.
G. Advances for Expenses. Expenses incurred by a person
indemnified hereunder in defending a civil, criminal, administrative or
investigative action, suit or proceeding (including all appeals) or threat
thereof, may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such person to repay such expenses if it shall ultimately be determined that
the person is not
-8-
<PAGE> 9
entitled to be indemnified by the Corporation and a written affirmation of the
person's good faith belief that he or she has met the applicable standard of
conduct. The undertaking must be a general personal obligation of the party
receiving the advances but need not be secured and may be accepted without
reference to financial ability to make repayment.
H. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation or one of its subsidiaries or is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against any
liability asserted against and incurred by that person in any such capacity, or
arising out of his status as such, whether or not the Corporation would have
the power to indemnify that person against such liability under the provisions
of this Article or under the Oregon Business Corporation Act.
I. Purpose and Exclusivity. The indemnification referred to in
the various Sections of this Article shall be deemed to be in addition to and
not in lieu of any other rights to which those indemnified may be entitled
under any statute, rule of law or equity, agreement, vote of the stockholders
or Board of Directors or otherwise. The Corporation is authorized to enter
into agreements of indemnification. The purpose of this Article is to augment
the provisions of the Oregon Business Corporation Act dealing with
indemnification.
J. Severability. If any of the provisions of this Article are
found, in any action, suit or proceeding, to be invalid or ineffective, the
validity and the effect of the remaining provisions shall not be affected.
These Articles of Incorporation are dated _____________, ______.
___________________________________________
___________________________________________
Person to contact about this filing: David R. Wilson, daytime phone number
(206) 442-8116.
-9-
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
TRENDWEST RESORTS, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1. SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . 1
Section 1.1 Annual Meeting . . . . . . . . . . . . . . . . . 1
Section 1.2 Special Meetings . . . . . . . . . . . . . . . . 1
Section 1.3 Notice . . . . . . . . . . . . . . . . . . . . . 1
Section 1.4 Waiver of Notice . . . . . . . . . . . . . . . . 1
Section 1.5 Voting . . . . . . . . . . . . . . . . . . . . . 1
Section 1.6 Quorum; Vote Required . . . . . . . . . . . . . . 2
Section 1.7 Action Without Meeting . . . . . . . . . . . . . 2
ARTICLE 2. BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Number and Election of Directors . . . . . . . . 2
Section 2.2 Vacancies . . . . . . . . . . . . . . . . . . . . 2
Section 2.3 Annual Meeting . . . . . . . . . . . . . . . . . 2
Section 2.4 Regular Meetings . . . . . . . . . . . . . . . . 3
Section 2.5 Special Meetings . . . . . . . . . . . . . . . . 3
Section 2.6 Telephonic Meetings . . . . . . . . . . . . . . . 3
Section 2.7 Waiver of Notice . . . . . . . . . . . . . . . . 3
Section 2.8 Quorum . . . . . . . . . . . . . . . . . . . . . 3
Section 2.9 Voting . . . . . . . . . . . . . . . . . . . . . 3
Section 2.10 Action Without Meeting . . . . . . . . . . . . . 3
Section 2.11 Removal of Directors . . . . . . . . . . . . . . 4
Section 2.12 Powers of Directors . . . . . . . . . . . . . . 4
Section 2.13 Committees . . . . . . . . . . . . . . . . . . . 4
Section 2.14 Chairman of the Board . . . . . . . . . . . . . 5
ARTICLE 3. OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 Composition . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Chief Executive Officer . . . . . . . . . . . . . 5
Section 3.3 President . . . . . . . . . . . . . . . . . . . . 5
Section 3.4 Vice President . . . . . . . . . . . . . . . . . 6
Section 3.5 Secretary . . . . . . . . . . . . . . . . . . . . 6
Section 3.6 Treasurer . . . . . . . . . . . . . . . . . . . . 6
Section 3.7 Removal . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 4. STOCK AND OTHER SECURITIES . . . . . . . . . . . . . . . . 6
Section 4.1 Certificates . . . . . . . . . . . . . . . . . . 6
Section 4.2 Transfer Agent and Registrar . . . . . . . . . . 6
Section 4.3 Transfer . . . . . . . . . . . . . . . . . . . . 6
Section 4.4 Necessity for Registration . . . . . . . . . . . 7
Section 4.5 Fixing Record Date . . . . . . . . . . . . . . . 7
Section 4.6 Record Date for Adjourned Meeting . . . . . . . . 7
Section 4.7 Lost Certificates . . . . . . . . . . . . . . . . 7
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 5. CORPORATE SEAL . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE 6. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 7. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
-ii-
<PAGE> 4
AMENDED AND RESTATED BYLAWS
OF
TRENDWEST RESORTS, INC.
ARTICLE 1.
SHAREHOLDERS' MEETINGS
Section 1.1 Annual Meeting. The annual meeting of the shareholders
will be held at 10:00 a.m. on the 15th day in the month of March of every year
at the principal office of the Corporation or at such other time, date or place
as may be determined by the Board of Directors. At such meeting the
shareholders entitled to vote will elect a Board of Directors and transact such
other business as may come before the meeting.
Section 1.2 Special Meetings. Special meetings of shareholders will
be held at any time on call of the President or the Board of Directors, or on
demand in writing by shareholders of record holding shares with at least 10
percent of the votes entitled to be cast on any matter proposed to be
considered at the special meeting.
Section 1.3 Notice. Written notice stating the place, date and time
of the meeting, and, in the case of a special meeting, the purpose or purposes
for which the meeting is called, will be delivered not less than ten nor more
than sixty days before the date of the meeting, either personally or by mail,
by or at the direction of the President or the Secretary, to each shareholder
of record entitled to vote at such meeting. If mailed, the notice will be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at the shareholder's address as it appears on the current
shareholder records of the Corporation, with postage prepaid.
Section 1.4 Waiver of Notice. A shareholder may, at any time, waive
any notice required by these Bylaws, the Articles of Incorporation or the
Oregon Business Corporation Act. Except as otherwise provided by this Section
1.4, the waiver must be in writing, must be signed by the shareholder and must
be delivered to the Corporation for inclusion in the minutes and filing in the
corporate records. A shareholder's attendance at a meeting waives any
objection to (a) lack of notice or defective notice, unless the shareholder
objects at the beginning of the meeting to holding the meeting or transacting
business at the meeting and (b) consideration of any matter at the meeting that
is not within the purpose or purposes described in the notice of a special
meeting, unless the shareholder objects to considering the matter when it is
first presented.
Section 1.5 Voting. Except as otherwise provided in the Articles of
Incorporation, each shareholder will be entitled to one vote, in person or by
proxy, on each matter voted on at a shareholder's meeting for each share of
stock outstanding in such shareholder's name on the records of the Corporation
which is entitled to vote on such matter. Unless held as trustee or in another
fiduciary capacity, shares may not be voted if held by another corporation in
which the Corporation holds a majority of the shares entitled to vote for
directors of such other corporation.
-1-
<PAGE> 5
Section 1.6 Quorum; Vote Required. A majority of the shares entitled
to vote on a matter, represented in person or by proxies, will constitute a
quorum with respect to that matter at any meeting of the shareholders. If a
quorum is present, action on a matter, other than the election of directors, is
approved if the votes cast in favor of the action exceed the votes cast in
opposition, unless the vote of a greater number is required by the Oregon
Business Corporation Act or the Articles of Incorporation. Election of
directors is governed by Section 2.1 of these Bylaws. Unless otherwise
provided in the Articles of Incorporation, a majority of votes represented at a
meeting of shareholders, whether or not a quorum, may adjourn the meeting to a
different time, date, or place. No further notice of the adjourned meeting is
required if the new time, date, and place is announced at the meeting prior to
adjournment and the date is set 120 days or less from the date of the original
meeting.
Section 1.7 Action Without Meeting. Any action required or permitted
to be taken at a meeting of shareholders may be taken without a meeting if a
written consent, or consents, describing the action taken is signed by all of
the shareholders entitled to vote on the action and is delivered to the
Corporation for inclusion in the minutes and filing with the corporate records.
The action is effective when the last shareholder signs the consent, unless the
consent specifies an earlier or later effective date. A consent signed under
this section has the effect of a meeting vote and may be described as such in
any document. Unless a record date for determining the shareholders entitled
to take action without a meeting is otherwise established, the record date for
that purpose is the date the first shareholder signs the consent. If the
Oregon Business Corporation Act requires that notice of a proposed action be
given to non-voting shareholders and that the action is to be taken by
unanimous consent of the shareholders, at least 10 days written notice of the
proposed action will be given to non-voting shareholders before the action is
taken.
ARTICLE 2.
BOARD OF DIRECTORS
Section 2.1 Number and Election of Directors. The Board of Directors
will consist of not less than six (6) members and not more than eleven (11)
members. The number of directors will be established within this range from
time to time by the Board of Directors. A decrease in the number of directors
will not have the effect of shortening the term of any incumbent director. At
each annual meeting, the shareholders will elect directors by a plurality of
the votes cast by the shares entitled to vote in the election. Each director
will be elected to hold office until the next annual meeting of shareholders
and until the election and qualification of a successor, subject to prior
death, resignation or removal.
Section 2.2 Vacancies. Unless otherwise provided in the Articles of
Incorporation, any vacancy occurring in the Board of Directors, including a
vacancy resulting from an increase in the number of directors, may be filled by
the Board of Directors or if the remaining directors do not constitute a
quorum, by the affirmative vote of a majority of the remaining directors. A
director elected to fill a vacancy will serve for the unexpired term of the
director's predecessor in office, subject to prior death, resignation or
removal.
Section 2.3 Annual Meeting. An annual meeting of the Board of
Directors will be held without notice immediately after the adjournment of the
annual meeting of the shareholders or at another time designated by the Board
of Directors upon notice in the same manner as
-2-
<PAGE> 6
provided in Section 2.5. The annual meeting will be held at the principal
office of the Corporation or at such other place as the Board of Directors may
designate.
Section 2.4 Regular Meetings. The Board of Directors may provide by
resolution for regular meetings. Unless otherwise required by such resolution,
regular meetings may be held without notice of the date, time, place or purpose
of the meeting.
Section 2.5 Special Meetings. Special meetings of the Board of
Directors may be called by the President, the Chief Executive Officer or any
member of the Board of Directors. Notice of each special meeting will be given
to each director, either by oral or in written notification actually received
not less than 24 hours prior to the meeting or by written notice mailed by
deposit in the United States mail, first class postage prepaid, addressed to
the director at the director's address appearing on the records of the
Corporation not less than 72 hours prior to the meeting. Special meetings of
the directors may also be held at any time when all members of the Board of
Directors are present and consent to a special meeting. Special meetings of
the directors will be held at the principal office of the Corporation or at any
other place designated by a majority of the Board of Directors.
Section 2.6 Telephonic Meetings. The Board of Directors may permit
directors to participate in a meeting by any means of communication by which
all of the persons participating in the meeting can hear each other at the same
time. Participation in such a meeting will constitute presence in person at
the meeting.
Section 2.7 Waiver of Notice. A director may, at any time, waive any
notice required by these Bylaws, the Articles of Incorporation or the Oregon
Business Corporation Act. Except as otherwise provided in this Section 2.7,
the waiver must be in writing, must be signed by the director, must specify the
meeting for which notice is waived, and must be delivered to the Corporation
for inclusion in the minutes and filing in the corporate records. A director's
attendance at a meeting waives any required notice, unless the director at the
beginning of the meeting or promptly upon the director's arrival objects to
holding the meeting or transacting business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting.
Section 2.8 Quorum. A majority of the number of directors that has
been established by the Board of Directors pursuant to Section 2.1 of these
Bylaws will constitute a quorum for the transaction of business.
Section 2.9 Voting. The act of the majority of the directors present
at a meeting at which a quorum is present will for all purposes constitute the
act of the Board of Directors, unless otherwise provided by the Articles of
Incorporation or these Bylaws.
Section 2.10 Action Without Meeting. Unless otherwise provided by
the Articles of Incorporation, any action required or permitted to be taken at
a Board of Directors meeting may be taken without a meeting if a written
consent, or consents, describing the action taken is signed by each director
and included in the minutes and filed with the corporate records. The action
is effective when the last director signs the consent, unless the consent
specifies an earlier or later effective date. A consent signed under this
section has the effect of an act of the Board of Directors at a meeting and may
be described as such in any document.
-3-
<PAGE> 7
Section 2.11 Removal of Directors. Unless otherwise provided by the
Articles of Incorporation, the shareholders, at any meeting of the shareholders
called expressly for that purpose, may remove any director from office, with or
without cause.
Section 2.12 Powers of Directors. The Board of Directors will have
the sole responsibility for the management of the business of the Corporation.
In the management and control of the property, business and affairs of the
Corporation, the Board of Directors is vested with all of the powers possessed
by the Corporation itself, so far as this delegation of power is not
inconsistent with the Oregon Business Corporation Act, the Articles of
Incorporation, or these Bylaws. The Board of Directors will have the power to
determine what amount constitutes net earnings of the Corporation, what amount
will be reserved for working capital and for any other purpose, and what
amount, if any, will be declared as dividends. Such determinations by the
Board of Directors will be final and conclusive except as otherwise expressly
provided by the Oregon Business Corporation Act or the Articles of
Incorporation. The Board of Directors may designate one or more officers of
the Corporation who will have the power to sign all deeds, leases, contracts,
mortgages, deeds of trust and other instruments and documents executed by and
binding upon the Corporation. In the absence of a designation of any other
officer or officers, the Chief Executive Officer is so designated.
Section 2.13 Committees. Unless the Articles of Incorporation
provide otherwise, a majority of the Board of Directors may designate from
among its members an Executive Committee and any number of other committees.
Each committee must consist of two or more directors and will have such powers
and will perform such duties as may be delegated and assigned to the committee
by the Board of Directors. No committee will have the authority of the Board
of Directors with respect to (a) approving dividends or other distributions to
shareholders, except as permitted by (h), below, (b) amending the Articles of
Incorporation, except as permitted by (j), below (c) adopting a plan of merger,
(d) recommending to the shareholders the sale, lease, exchange, or other
disposition of all or substantially all the property and assets of the
Corporation other than in the usual and regular course of its business, (e)
recommending to the shareholders a voluntary dissolution of the Corporation or
a revocation thereof, (f) approving or proposing to shareholders other actions
required to be approved by the shareholders, (g) approving a plan of merger
which does not require shareholder approval, (h) authorizing or approving any
reacquisition of shares of the Corporation, except pursuant to a formula or
method prescribed by the Board of Directors, (i) authorizing or approving the
issuance, sale or contract for sale of shares of the Corporation's stock except
either pursuant to a stock option or other stock compensation plan or where the
Board of Directors has determined the maximum number of shares and has
expressly delegated this authority to the committee, (j) determining the
designation and relative rights, preferences and limitations of a class or
series of shares, unless the Board of Directors has determined a maximum number
of shares and expressly delegated this authority to the committee, (k)
adopting, amending or repealing Bylaws for the Corporation, or (l) filling
vacancies on the Board of Directors or on any of its committees or (m) taking
any other action which the Oregon Business Corporation Act prohibits a
committee of a board of directors to take. The provisions of Sections 2.4,
2.5, 2.6, 2.7, 2.8, 2.9, and 2.10 of the Bylaws will also apply to all
committees of the Board of Directors. Each committee will keep written records
of its activities and proceedings. All actions by committees will be reported
to the Board of Directors at the next meeting following the action and the
Board of Directors may ratify, revise or alter such action, provided that no
rights or acts of third parties will be affected by any such revision or
alteration.
-4-
<PAGE> 8
Section 2.14 Chairman of the Board. The Board of Directors may elect
one of its members to be Chairman of the Board of Directors. The Chairman will
advise and consult with the Board of Directors and the officers of the
Corporation as to the determination of policies of the Corporation, will
preside at all meetings of the Board of Directors and of the shareholders, and
will perform such other functions and responsibilities as the Board of
Directors may designate from time to time.
ARTICLE 3.
OFFICERS
Section 3.1 Composition. The officers of this Corporation will
consist of at least a President and a Secretary and may also include a separate
Chief Executive Officer, one or more Vice Presidents and a Treasurer, each of
whom will be elected by the Board of Directors at the annual meeting of the
Board of Directors or at any regular meeting of the Board of Directors or at
any special meeting called for that purpose. Other officers and assistant
officers and agents may be elected or appointed by or in the manner directed by
the Board of Directors as the Board of Directors may deem necessary or
appropriate. Any vacancies occurring in any office of this Corporation may be
filled by election or appointment by the Board of Directors at any regular
meeting or any special meeting called for that purpose. Each officer will hold
his or her office until the next annual meeting of the Board of Directors and
until the election and qualification of a successor in such office, subject to
prior death, resignation or removal.
Section 3.2 Chief Executive Officer. The Board of Directors may
designate one of the officers of the Corporation or the Chairman of the Board
of Directors to serve as the Chief Executive Officer of the Corporation. The
Chief Executive Officer will be responsible for implementing the policies and
goals of the Corporation as stated by the Board of Directors and will have
general supervisory responsibility and authority over the property, business
and affairs of the Corporation. Unless otherwise provided by the Board of
Directors, the Chief Executive Officer will have the authority to hire and fire
employees and agents of the Corporation and to take such other actions as the
Chief Executive Officer deems to be necessary or appropriate to implement the
policies, goals and directions of the Board of Directors.
Section 3.3 President. In the absence of a specific designation by
the Board of Directors of a separate Chief Executive Officer, the President
will have all the responsibilities and authority of the Chief Executive Officer
as set forth in Section 3.1 and may be referred to as the Corporation's Chief
Executive Officer. The President may sign any documents and instruments of the
Corporation which require the signature of the President under the Oregon
Business Corporation Act, the Articles of Incorporation or these Bylaws. The
President will also have such responsibilities and authority as may be
delegated to the President by the Chief Executive Officer or prescribed by the
Board of Directors. At the request of the Chairman of the Board of Directors
or in the Chairman's absence, the President will preside at meetings of the
Board of Directors and at meetings of the shareholders. Upon the death,
resignation or removal of the President, the Board of Directors may appoint a
Vice President or another person to serve as an "acting" or "interim" President
to serve as such until the position is filled by action of the Board of
Directors. Unless otherwise provided by the Board of
-5-
<PAGE> 9
Directors, an "acting" or "interim" President will have all responsibilities
and authority of the President.
Section 3.4 Vice President. A Vice President will have such
responsibilities and authority as may be prescribed by the Board of Directors
or as may be delegated by the Chief Executive Officer or the President to such
Vice President. If at any time there is more than one Vice President, the
Board of Directors may designate the order of seniority or the areas of
responsibility of such Vice Presidents. A Vice President (or if more than one,
the Vice Presidents in order of seniority by designation or order of
appointment) will have all of the powers and perform all of the duties of the
President during the absence or disability of the President.
Section 3.5 Secretary. The Secretary will keep the minutes and
records of all the meetings of the shareholders and directors and of all other
official business of the Corporation. The Secretary will give notice of
meetings to the shareholders and directors and will perform such other duties
as may be prescribed by the Board of Directors.
Section 3.6 Treasurer. The Treasurer will receive all moneys and
funds of the Corporation and deposit such moneys and funds in the name of and
for the account of the Corporation with one or more banks designated by the
Board of Directors or in such other short-term investment vehicles as may from
time to time be designated or approved by the Board of Directors. The
Treasurer will keep accurate books of account and will make reports of
financial transactions of the Corporation to the Board of Directors, and will
perform such other duties as may be prescribed by the Board of Directors. If
the Board of Directors elects a Vice President, Finance or a Chief Financial
Officer, the duties of the office of Treasurer may rest in that officer.
Section 3.7 Removal. The directors, at any regular meeting or any
special meeting called for that purpose, may remove any officer from office
with or without cause; provided, however, that no removal will impair the
contract rights, if any, of the officer removed or of this Corporation or of
any other person or entity.
ARTICLE 4.
STOCK AND OTHER SECURITIES
Section 4.1 Certificates. All stock and other securities of this
Corporation will be represented by certificates which will be signed by the
President or a Vice President and the Secretary or an Assistant Secretary of
the Corporation, and which may be sealed with the seal of the Corporation or a
facsimile thereof.
Section 4.2 Transfer Agent and Registrar. The Board of Directors may
from time to time appoint one or more Transfer Agents and one or more
Registrars for the stock and other securities of the Corporation. The
signatures of the President or a Vice President and the Secretary or an
Assistant Secretary upon a certificate may be facsimiles if the certificate is
manually signed by a Transfer Agent, or registered by a Registrar.
Section 4.3 Transfer. Title to a certificate and to the interest in
this Corporation represented by that certificate can be transferred only (a) by
delivery of the certificate
-6-
<PAGE> 10
endorsed by the person designated by the certificate to be the owner of the
interest represented thereby either in blank or to a specified person or (b) by
delivery of the certificate and a separate document containing a written
assignment of the certificate or a power of attorney to sell, assign or
transfer the same, signed by the person designated by the certificate to be the
owner of the interest represented thereby either in blank or to a specified
person.
Section 4.4 Necessity for Registration. Prior to presentment for
registration upon the transfer books of the Corporation of a transfer of stock
or other securities of this Corporation, the Corporation or its agent for
purposes of registering transfers of its securities may treat the registered
owner of the security as the person exclusively entitled to vote the
securities; to receive any notices to shareholders; to receive payment of any
interest on a security, or of any ordinary, extraordinary, partial liquidating,
final liquidating, or other dividend, or of any other distribution, whether
paid in cash or in securities or in any other form; and otherwise to exercise
or enjoy any or all of the rights and powers of an owner.
Section 4.5 Fixing Record Date. The Board of Directors may fix in
advance a date as record date for the purpose of determining the registered
owners of stock or other securities (a) entitled to notice of or to vote at any
meeting of the shareholders or any adjournment thereof; (b) entitled to receive
payment of any interest on a security, or of any ordinary, extraordinary,
partial liquidating, final liquidating, or other dividend, or of any other
distribution, whether paid in cash or in securities or in any other form; or
(c) entitled to otherwise exercise or enjoy any or all of the rights and powers
of an owner, or in order to make a determination of registered owners for any
other proper purpose. The record date will be not more than 70 days and, in
the case of a meeting of shareholders, not less than 10 days prior to the date
on which the particular action which requires such determination of registered
owners is to be taken.
Section 4.6 Record Date for Adjourned Meeting. A determination of
shareholders entitled to notice of or to vote at a meeting of the shareholders
is effective for any adjournment of the meeting unless the Board of Directors
fixes a new record date. A new record date must be fixed if a meeting of the
shareholders' is adjourned to a date more than 120 days after the date fixed
for the original meeting.
Section 4.7 Lost Certificates. In case of the loss or destruction of
a certificate of stock or other security of this Corporation, a duplicate
certificate may be issued in its place upon such conditions as the Board of
Directors may prescribe.
ARTICLE 5.
CORPORATE SEAL
If the Corporation has a corporate seal, its size and style is shown by the
impression below:
-7-
<PAGE> 11
ARTICLE 6.
AMENDMENTS
Unless otherwise provided in the Articles of Incorporation, the Bylaws
of the Corporation may be amended or repealed by the directors, subject to
amendment or repeal by action of the shareholders, at any regular meeting or at
any special meeting called for that purpose, provided notice of the proposed
change is given in the notice of the meeting or notice thereof is waived in
writing.
ARTICLE 7.
SEVERABILITY
If any provision of these Bylaws is found, in any action, suit or
proceeding, to be invalid or ineffective, the validity and the effect of the
remaining provisions will not be affected.
Adopted by action of the Board of Directors of Trendwest Resorts, Inc.
as of ___________________, 1997.
-8-
<PAGE> 1
Exhibit 10.1
* * * WORLDMARK, THE CLUB * * *
MANAGEMENT AGREEMENT
(Fourth Amended)
THIS MANAGEMENT AGREEMENT is dated for reference purposes September 30,
1994, by and between WORLDMARK, THE CLUB, a California nonprofit mutual benefit
corporation ("Club"), and TRENDWEST RESORTS, INC., an Oregon corporation
("Manager" herein, and the "Declarant" under the Declaration establishing the
Vacation Owner Program), for the purpose of amending and restating in its
entirety as amended that Management Agreement between the same parties dated
September 14, 1989 and amended October 25, 1990, February 13, 1991, and December
21, 1992.
1: RECITALS.
1.1 Program. The Vacation Owner Program (the "Program") has been
created or will be created and enlarged by Manager by the recording in the
office of the county recorder of each county where Property subject to the
Program is located, that certain Declaration of Vacation Timeshare Program, Club
Esprit ("Declaration"), the first of which in dated September 14, 1989, and a
counterpart of which shall be recorded in each county, and shall describe each
Resort, where Club owns or leases real property subject to the Vacation-owner
Program and Club Memberships.
1.2 Property. Pursuant to the Declaration, Declarant shall convey or
transfer or cause to be conveyed or transferred each Phase of Property to the
Club at the same time the Declaration is recorded or filed as to that Phase.
1.3 Club. The Club is and will be responsible for ownership or leasing
and maintenance, control, operation, and management of the Property within the
Program, and for cleaning, maintenance, furniture repair and replacement, maid
service and general care of the Property.
1.4 Manager. The Club is authorized to retain a professional manager
and to delegate to such manager certain of the Club's powers and
responsibilities. The Board of Directors of the Club desires to engage Manager
to manage and operate the Vacation Program contemplated by the Declaration, and
Manager desires to accept such engagement, all on the terms and conditions set
forth below and pursuant to the Governing Documents.
-1-
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
Article/Section Page
- --------------- ----
<S> <C>
1: RECITALS................................................................ -1-
1.1 Program........................................................ -1-
1.2 Property....................................................... -1-
1.3 Club........................................................... -1-
1.4 Manager........................................................ -1-
2: ENGAGEMENT OF MANAGER................................................... -4-
3: DEFINITIONS............................................................. -4-
4: TERM.................................................................... -4-
4.1 Initial Term................................................... -4-
4.2 Automatic Renewal.............................................. -4-
4.3 Notice of Nonrenewal........................................... -4-
4.4 Termination.................................................... -4-
4.5 Resignation.................................................... -5-
4.5(a) Notice........................................ -5-
4.5(b) New Agreement................................. -5-
4.6 Return of Materials............................................ -5-
4.7 Audit.......................................................... -5-
5: DUTIES AND OBLIGATIONS OF MANAGER....................................... -5-
5.1 Generally. .................................................... -5-
5.1(a) Powers........................................ -5-
5.1(b) Delegation.................................... -5-
5.1(c) Efficiency.................................... -6-
5.2 Administrative Services........................................ -6-
5.2(a) Club Meetings................................. -6-
5.2(b) Club Records.................................. -6-
5.2(c) Rules......................................... -6-
5.2(d) Roster........................................ -6-
5.2(e) Club Insurance................................ -6-
5.2(f) Reservations.................................. -6-
5.2(g) Exchange Program.............................. -6-
5.2(h) Vote.......................................... -7-
5.2(i) Professionals................................. -7-
5.3 Financial Services............................................. -7-
5.3(a) Budget........................................ -7-
5.3(b) Special Assessments........................... -7-
5.3(c) Collections................................... -7-
5.3(d) Bank Accounts................................. -7-
5.3(e) Disbursements................................. -8-
5.3(f) Financial Statements.......................... -8-
5.3(g) Books and Records............................. -8-
5.3(h) Reports....................................... -8-
5.3(i) Inventory..................................... -8-
5.4 Physical Services.............................................. -8-
5.4(a) Inspections................................... -8-
5.4(b) Repair and Maintenance........................ -8-
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C>
5.4(c) Check-In and Check-Out........................ -9-
5.4(d) Maid Service.................................. -9-
5.4(e) Major cleaning................................ -9-
5.4(f) Right of Entry................................ -9-
5.5 Manager Insurance.............................................. -9-
5.5(a) Worker's Compensation......................... -9-
5.5(b) Liability..................................... -9-
5.5(c) Fidelity...................................... -9-
5.5(d) Errors and Omissions.......................... -10-
5.6 Limitations.................................................... -10-
5.6(a) Contracts..................................... -10-
5.6(b) Budget........................................ -10-
5.7 Limited Liability.............................................. -10-
6: COMPENSATION............................................................ -11-
6.1 Fee............................................................ -11-
6.2 Expenses....................................................... -11-
6.3 Advances and Reimbursements.................................... -11-
6.4 Payment........................................................ -11-
6.5 Discounts...................................................... -11-
7: GENERAL PROVISIONS...................................................... -12-
7.1 Agency......................................................... -12-
7.2 Amendment...................................................... -12-
7.3 Arbitration.................................................... -12-
7.4 Assignment..................................................... -12-
7.5 Attorneys' Fees................................................ -12-
7.6 Captions....................................................... -12-
7.7 Competition.................................................... -12-
7.8 Entire Agreement............................................... -12-
7.9 Further Assurances............................................. -13-
7.10 Hold Harmless and Indemnity.................................... -13-
7.11 Law Applicable................................................. -13-
7.12 Legal Effects.................................................. -13-
7.13 Notices........................................................ -13-
7.13(a) Manager................................................ -13-
7.13(b) Club................................................... -14-
7.14 Parties In Interest............................................ -14-
7.15 Reasonableness................................................. -14-
7.16 Records........................................................ -14-
7.17 Remedies....................................................... -14-
7.18 Severability................................................... -14-
7.19 Successors..................................................... -14-
7.20 Survival....................................................... -14-
7.21 Time........................................................... -15-
7.22 Waiver......................................................... -15-
7.23 Word Usage..................................................... -15-
7.24 Exhibits....................................................... -15-
8: SIGNATURES.............................................................. -15-
Exhibit:
A Club Budget
</TABLE>
-3-
<PAGE> 4
2: ENGAGEMENT OF MANAGER. Club hereby engages Manager as the exclusive
managing and servicing agent of the Vacation Owner Program contemplated by the
Declaration, and Manager hereby accepts said appointment and undertakes to
perform all of the services and responsibilities set forth herein in such
capacity, to implement and to comply with all the provisions of this Agreement
and the Governing Documents. If there is a conflict, the Declaration and Bylaws
shall supersede this Agreement.
3: DEFINITIONS. Unless the context otherwise requires, the Definitions set
forth in the DECLARATION OF VACATION TIMESHARE PROGRAM (CLUB ESPRIT -- OTTER
CREST) as may be amended from time to time ("Declaration"), are hereby adopted
as the definitions herein. The Declaration was originally recorded September 6,
1989, in Microfilm Volume 209, Page 141, Official Records, Lincoln County,
Oregon. A substantially similar Declaration shall be recorded in each county,
and shall describe each Resort, where the club owns or leases real property
subject to the Vacation Owner Program and Club Memberships. The provisions of
recorded Declarations shall have priority over this Agreement, and inconsistent
provisions among various Declarations shall be resolved in favor of the most
restrictive provision on the Club or Declarant and/or the most favorable
provision for protecting the Members.
4: TERM.
4.1 Initial Term. Unless terminated earlier pursuant to Paragraph 4.4,
below, the initial term of this Agreement shall be for a period of three (3)
years commencing on the date first written above or on October 1, 1989,
whichever is later ("effective date").
4.2 Automatic Renewal. The term of this Agreement shall be
automatically renewed annually on the anniversary of the effective date for one
(1) year at each renewal.
4.3 Notice of Nonrenewal. The Club may prevent automatic renewal by the
vote or written assent of a majority of the Voting Power residing in Members
other than Declarant and providing written notice of non-renewal to Manager at
least sixty (60) days prior to expiration of the then current term.
4.4 Termination. This Agreement may be terminated for cause at any time
prior to expiration, provided that, if the cause constitutes a breach or default
of this Agreement which is capable of being cured, such breach or default shall
not have been cured within 30 days following receipt by Manager of written
notice of such breach or default. If Manager shall dispute a termination by the
Club pursuant to this paragraph, the dispute may, at Manager's option be
submitted to arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association.
-4-
<PAGE> 5
4.5 Resignation. Manager may resign only upon the following conditions:
4.5(a) Notice. Manager shall have given at least 90 days prior
written notice to the Club; and
4.5(b) New Agreement. Prior to or at the expiration of the 90-day
notice period Club shall have entered into a management agreement with another
management firm in accordance with applicable provisions of the Governing
Documents, or shall have made a determination to discharge the duties delegated
to Manager hereunder with its own personnel or otherwise; provided, however,
that if the Club shall fail to make reasonable efforts during such 90-day
period, Manager's resignation shall be effective at the end of such 90-day
notice period. If the Club has made reasonable efforts during such 90-day period
to satisfy such requirements and has not entered into such a management
agreement, or determined to discharge the duties delegated to Manager hereunder
with its own personnel or otherwise and thereafter continues to use reasonable
efforts to discharge such requirements, the resignation of Manager shall not be
effective until such a new management agreement is entered into between the Club
and a new management firm, or the Club has determined to discharge such duties
with its own personnel or otherwise.
4.6 Return of Materials, On or before the effective date of Manager's
resignation or termination or expiration of this Agreement, Manager shall give
to the successor managing agent or the Club all books and records relating to
the management and operation of the Club and the Program and any Club
proprietary materials.
4.7 Audit. Any audit requested upon termination or expiration of this
Agreement shall be at the expense of the party requesting the audit.
5: DUTIES AND OBLIGATIONS OF MANAGER.
5.1 Generally. Manager shall provide or cause to be provided all
services and personnel required to administer the affairs of the Club and to
manage and operate the Vacation Program contemplated by the Declaration, at all
times not inconsistent with the Governing Documents, the resolutions of the
Board and Members, and this Agreement.
5.1(a) Powers. Manager shall have all the powers and authority, and
limitations thereon, which the Club Board has, pursuant to the Governing
Documents, to the extent necessary to perform its duties and obligations
hereunder.
5.1(b) Delegation. Subject to Paragraph 5.6 below, Manager may
delegate its authority and responsibilities to one or more subagents or
subcontractors, whether or not affiliated with Manager, for such periods and
upon such terms as Manager deems
-5-
<PAGE> 6
proper, but shall remain ultimately responsible for the performance of any such
subagents.
5.1(c) Efficiency. Manager will furnish its services and use its
best efforts to provide Club with economic efficiency consistent with safe and
proper management and enjoyment of the Program by the Members and their guests.
Manager will use its best efforts to keep total operating costs within the
Budget.
5.2 Administrative Services. Without limiting the generality of the
foregoing, Manager shall provide the following administrative services:
5.2(a) Club Meetings. Manager shall organize and attend the
meetings of the Board and of the Members, including the preparation and delivery
of notices of meetings, in accordance with the Bylaws. Manager shall prepare the
agenda for all meetings and assist in the conduct of the meetings and oversee
the election of directors and other business. Manager shall circulate minutes of
any such meeting as prepared by the secretary of the Club.
5.2(b) Club Records. Manager shall maintain all records of the
affairs of the Club, including, but not limited to, minutes of meetings,
correspondence, financial records and modification of Bylaws and Rules and
Regulations.
5.2(c) Rules. Manager shall, from time to time as necessary or
desirable, recommend to the Club that it amend or supplement the Rules and
Regulations.
5.2(d) Roster. Manager shall compile and maintain a complete and
accurate list of Members ("Roster") setting forth the name and mailing address
of each Member. Manager shall, upon written request from a Member, furnish a
copy of the Roster to the Member, provided that the Manager may (i) charge a
reasonable fee to such Member for the cost of preparation of the Roster, and
(ii) require that such Member agree in writing to make no commercial use of the
Roster.
5.2(e) Club Insurance. Manager shall procure and keep in force all
insurance required by the Governing Documents. Manager shall administer all such
insurance and any claims under such insurance policies.
5.2(f) Reservations. Manager shall establish and operate a
reservation system implementing the reservation procedure set forth in the
Rules. The reservation system shall include the books and records required to
reflect reservations made, Assigned Periods actually used, and such other
information as shall be necessary to coordinate efficiently the Program
operation.
5.2(g) Exchange Program. Manager shall administer any exchange
program with which Club may be affiliated from time to time.
-6-
<PAGE> 7
5.2(h) Vote. If specifically authorized by Club, Manager shall
represent and act and vote for the membership of the club in all Home Owner or
Condominium Associations ("Master Associations") at Projects where the Club owns
Property. Manager shall exercise such vote and representation in the best
interest of the Club, in Manager's discretion unless specifically directed by
the Club.
5.2(i) Professionals. Manager may hire or retain on behalf of Club,
and coordinate with, professionals such as attorneys, accountants and engineers,
but must obtain Board or Member approval if the cost of such professional(s) is
not included in the Budget.
5.3 Financial Services. Without limiting the generality of Section 5.1
above, Manager shall, subject to the supervision of the Club, provide the
following financial services:
5.3(a) Budget. Attached hereto as Exhibit A is the initial budget
for the Club. Manager shall prepare and submit to the Board for approval, not
less than 90 days prior to the end of each succeeding Fiscal Year, a budget
meeting the requirements of the Governing Documents. Each budget approved by the
Board is called the "Budget".
5.3(b) Special Assessments. Manager shall determine whether a
special assessment may be required, from time to time, and, promptly upon making
a determination that a special assessment is required, shall submit a
recommendation to the Board that a special assessment be levied.
5.3(c) Collections. To the extent that Assessments against Members
are not otherwise collected from Members, Manager shall cause the Assessments to
be collected and enforce payment of Assessments as follows:
(i) Manager shall cause to be prepared and mailed to all
Members periodic statements setting forth the amount of all Assessments then due
from each Member, pursuant to the Bylaws; and,
(ii) Manager shall cause to be prepared and mailed to any
delinquent Members a notice of delinquency and shall use every effort to collect
delinquent Assessments as provided in the Governing Documents.
5.3(d) Bank Accounts. Manager shall establish the bank accounts
provided for in the Bylaws or designated by the Board, and shall promptly
deposit or invest funds collected from Members and all other amounts collected
by Manager in connection with the performance of its duties hereunder, in the
accounts designated for such purposes. The Manager shall keep accurate books and
records reflecting the amount of such accounts attributable to each Member.
-7-
<PAGE> 8
5.3(e) Disbursements. Manager shall disburse from the bank
accounts, over two signatures, only in the payment of all expenses incurred
consistent with the applicable Budget and as otherwise permitted by the
Governing Documents and adequately substantiated in writing, in Manager's sole
discretion.
5.3(f) Financial Statements. Manager shall cause an audit to be
conducted and the financial statements to be prepared and copies thereof
distributed to each Member as provided in the Governing Documents.
5.3(g) Books and Records. Manager shall keep and maintain or cause
to be kept and maintained full and adequate books and records reflecting the
results of operation of the Program in accordance with generally accepted
accounting principles. The books of account and other records relating to the
operation of the Program shall be available to the Club and its representatives
at all reasonable times for examination, inspection and transcription.
5.3(h) Reports. Manager shall prepare or cause to be prepared the
reports and statements required to be prepared by the Governing Documents and
such additional membership communications and reports as to subjects and
frequency as the Board reasonably requests.
5.3(i) Inventory. Manager shall maintain an accurate inventory of
all chattels, equipment, tools, appliances, materials and supplies purchased for
or owned or leased by the Club.
5.4 Physical Services. Without limiting the generality of Section 5.1
above, Manager shall provide the following physical services.
5.4(a) Inspections. Manager shall make regular inspections of the
Units and render reports and make recommendations concerning the Property to the
Board. In addition, but not by way of limitation, after each Member has
checked-out of a Unit, the written inventory of the Common Furnishings completed
by the Member who just vacated the Unit (or, if such occupant failed to complete
a written inventory, the master written inventory for such Unit) shall be
compared with an inventory actually made by the Manager or the Manager's agent
subsequent to such occupant's departure, and both such inventories shall be
retained for a period of at least one year. In addition, a general check shall
be made of the physical condition of the Unit, and any damage thereto (other
than normal wear and tear) shall be noted. If any item is missing or there is
damage to the Unit, Manager shall, at the expense of the Club, replace the
missing item(s) and/or cause the damage to be repaired and shall charge the
Member for the missing item(s) and/or the damage, if in the judgment of Manager
it is reasonable to do so.
5.4(b) Repair and Maintenance. Manager shall cause the Property,
the Units and the Common Furnishings to be repaired,
-8-
<PAGE> 9
maintained, repainted, furnished and refurnished in a manner consistent with the
reserves established for such purposes and as required to maintain the quality
standards of the Club, and for which adequate personnel shall be available at
all times.
5.4(c) Check-In and Check-Out. Manager shall cause on-site
personnel to be available at all required times in order to check-in and
check-out Members and/or their Guests.
5.4(d) Maid Service. Manager shall cause maid service to be
provided to the Units as prescribed by the Club.
5.4(e) Major cleaning. Manager shall cause each Unit to be
thoroughly cleaned at least annually and otherwise assure that it is in a
first-class condition at all times during Assigned Periods and Bonus Use.
5.4(f) Right of Entry. Manager, or its duly authorized agents or
employees, shall have the right, at reasonable times and upon reasonable notice,
without liability to the Member, to enter into any Unit for the purposes of
carrying out the above described duties and responsibilities, if necessary, or
(i) maintaining such Unit in good repair and sanitary condition; (ii) removing
any Improvements constructed, reconstructed, refinished, altered or maintained
in or upon such Unit in violation of the Governing Documents; (iii) restoring
such Unit as authorized by the Governing Documents; (iv) installing utilities or
conveniences for the Unit or any other Unit; or (v) otherwise enforcing or
carrying out its duties or the duties of Club under the Governing Documents and
applicable laws and ordinances. "Reasonable notice" of entry shall mean at least
forty-eight (48) hours except in emergencies.
5.5 Manager Insurance. Manager shall, at its sole cost and expense,
furnish to Club, prior to the effective date, satisfactory evidence of the
following insurance coverages (i) showing Manager as the named insured, (ii)
written by such carrier or carriers as shall be acceptable to the Club, (iii)
naming Club as an additional insured and/or providing for waiver of subrogation
as to club, (iv) and providing that they are cancelable only upon 30 days prior
written notice to the secretary of the Club:
5.5(a) Worker's Compensation. Insurance required by the Worker's
Compensation Laws of the respective states wherein Manager has employees;
5.5(b) Liability. Insurance against loss or damage resulting from
damage to property in the amount of at least $100,000 and injury or death to any
person or persons in the aggregate sum of at least $1,000,000 per occurrence.
5.5(c) Fidelity. A bond or insurance in favor of the Club, against
loss from monies, securities or other properties being stolen, converted or
misappropriated by Manager or any of its
-9-
<PAGE> 10
directors, officers or employees, in an amount reasonably satisfactory to the
regulatory authorities in states where Memberships are marketed; and
5.5(d) Errors and Omissions insurance if available at reasonable
and competitive rates.
5.6 Limitations. Notwithstanding the powers of the Manager described
above in Paragraphs 5.1 through 5.5, inclusive, Manager shall not:
5.6(a) Contracts. Enter into a contract with a third person or
entity whereby such person or entity will furnish goods or services to the
Program or a Property for a term longer than one year unless authorized by the
vote or written consent of at least a majority of the Voting Power held by
Members other than Declarant, except for:
(i) Utilities. A contract with a public utility company if
the rates charged for the materials or services are regulated by a public
utilities commission; provided, however, that the term of the contract shall not
exceed the shortest term for which the utility company will contract at the
regulated rate;
(ii) Insurance. Prepaid casualty and/or liability insurance
policies not to exceed a term of three years, provided that the policy permits
short rate cancellation by the insured; or
(iii) Five-year or shorter contracts or leases for the
following (so long as the lessor or provider is not an entity in which Declarant
or Manager has a direct or indirect interest of ten percent (10%) or more): (1)
Common Furnishings; (2) laundry room fixtures and equipment; (3) cable or
satellite TV equipment or services; (4) alarm services or equipment; and/or (5)
access to an exchange program by Members electing to participate therein.
5.6(b) Budget. Enter into any contract in the name of the Club for
goods or services unless (a) the amount payable by the Club pursuant thereto
shall not exceed the amount for such items set forth in the then current Budget;
(b) such contract provides that the persons or entities with whom such contract
is made shall have no claim against the club for any amount whatsoever in excess
of the amount for such item(s) as is set forth in the then current Budget; and
(c) Manager has authorized total expenditures for such item(s) during the fiscal
year not in excess of the total amount budgeted therefor.
5.7 Limited Liability. Manager shall not be responsible for the acts,
omissions to act or conduct of any of the Members of for the breach of any of
the obligations of any of the Members.
-10-
<PAGE> 11
6: COMPENSATION.
6.1 Fee. Manager shall receive a monthly compensation equal to
one-twelfth (1/12th) of the lesser of (a) fifteen percent (15%) of the budgeted
annual expenses and reserves of the Club, exclusive of Manager's Fee, or (b) the
projected amount remaining after the Club pays or adequately provides for its
expenses and reserves, which amount shall be adjusted as each year passes to
equal the actual amount so available. Manager shall not be entitled to extra
compensation for attendance at meetings or other extraordinary time commitments.
6.2 Expenses. Club shall be responsible for and pay or reimburse
Manager for all costs and expenses arising from: (a) Ownership and management of
the Property (except direct costs of acquisition or as lessee); (b) services
applied directly to Club purposes, and solely for the benefit of Clubs, Club,
such as maid and cleaning, telephone, postage, messenger and delivery,
photocopying, and printing; (c) rent and utilities for offices used solely for
Club business; (d) supplies and equipment used solely for Club business,
including lease or rent payments therefor; (e) Club employees or independent
contractors for services rendered exclusively to Club; (f) insurance for Club
and Club employees as required by the Governing Documents.
Manager shall be responsible for and pay from Manager's own funds all
costs and expenses arising from: (a) acquisition or leasing of the Property and
transfer or sublease thereof to the Club; (b) services which are not applied
directly to Manager's duties hereunder and are not solely for the benefit of
club; (c) supplies, equipment and offices not used exclusively for the benefit
of Club; (d) advertising, commissions and other marketing costs regarding sales
of Membership; (e) insurance or bonding required of Manager by this Agreement;
and (f) employees of Manager.
6.3 Advances and Reimbursements. Manager shall not be required to
perform any act or duty hereunder involving an expenditure of money unless there
shall be sufficient funds therefor in the bank accounts of the Club. If at any
time the funds in the bank accounts of the Club are not sufficient to pay Club
obligations in a timely manner, Manager, although not obligated to do so, may
advance such sums as it deems necessary, and Manager shall thereupon be entitled
to reimburse itself from Club funds for the amount of such advances, together
with interest at the rate of 10% per year beginning from and after 20 days from
the date of the advance by Manager.
6.4 Payment. Manager is hereby authorized to pay itself its Management
Fee, reimbursements, and authorized expenses, out of the General Account of the
Club.
6.5 Discounts. All discounts, rebates or commissions or like items
shall benefit the Club.
-11-
<PAGE> 12
7: GENERAL PROVISIONS.
7.1 Agency. Nothing in this Agreement shall constitute a partnership
between, or joint venture by, the parties hereto, or constitute Manager an
employee of Club. Manager is an independent contractor.
7.2 Amendment. No supplements, modification or amendment of this
Agreement shall be established except in a writing executed by each of the
parties.
7.3 Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the making, performance, or interpretation thereof, shall be
settled by arbitration in King County, Washington, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then
existing, and judgment on the arbitration award may be entered in any court
having jurisdiction over the subject matter of the controversy.
7.4 Assignment. This Agreement is personal between or among the
parties, and neither party may sell, assign, transfer, or hypothecate any rights
or interests created under this Agreement without the express written consent of
the other party. Any purported sale, assignment, transfer, or hypothecation of
any such rights or interests of either party without such consent shall be void.
7.5 Attorneys' Fees. Should any action or proceeding be commenced
between the parties hereto concerning this Agreement or their rights and duties
hereunder, the party prevailing in such action or proceeding shall be entitled
to reasonable attorneys' fees and costs in such action or proceeding, which
shall be determined by the court or arbitrator. Each party shall bear its own
costs, expenses, and attorney fees incurred in negotiating, preparing, and
signing this Agreement.
7.6 Captions. The subject headings or captions in this Agreement are
for convenience and reference only and do not in any way modify, interpret, or
construe the intent of the parties or affect any of the provisions of this
Agreement.
7.7 Competition. Club agrees that it will not solicit, hire, employ, or
in any way obtain or retain the services of any employee of Manager, whether or
not for compensation, during the Term of this Agreement and for a period of
twelve (12) months following the date of termination or expiration of this
Agreement.
7.8 Entire Agreement. This Agreement and all documents executed
contemporaneously herewith and/or specifically referred to herein, such as the
Governing Documents, constitute the complete, exclusive and final expression of
the agreement between the parties pertaining to the subject matter contained in
it; it supersedes all prior and contemporaneous agreements, representations, and
-12-
<PAGE> 13
understandings of the parties; and it may not be contradicted by evidence of any
prior or contemporaneous agreement. No extrinsic evidence whatsoever may be
introduced in any proceeding concerning the terms of this Agreement.
7.9 Further Assurances. The parties hereto agree to perform any
further acts and to execute and deliver any further documents which may be
necessary or appropriate to carry out the purposes of this Agreement.
7.10 Hold Harmless and Indemnity. Each of the parties agrees to hold
the other party harmless and indemnify the other party from and against any and
all loss, cost, damage or liability which the other party may incur or sustain
as a result of any action by such party or any breach by such party of any
warranty or representation contained in this Agreement, or for any
misrepresentation or material omission in the representations herein, or for any
violation of any applicable law, ordinance or regulation, whether by neglect or
willful act and whether by a party or its agents contractors, or employees. Club
agrees to hold harmless and indemnify Manager from and against any and all loss,
cost, damage or liability to which Manager may be subjected by reasonable, good
faith performance of its duties hereunder. Such indemnification shall include,
among other costs, attorneys' fees and costs of appeal, settlement or defense,
and the obligation to undertake or assume the defense of any claim.
7.11 Law Applicable. This Agreement and its interpretation,
construction, and enforcement, shall be governed by the laws of the State of
Washington.
7.12 Legal Effects. No representation, warranty or recommendation is
made by any party or his respective agent or attorney regarding the legal
sufficiency or effect or tax consequences of any transaction contemplated under
this Agreement to any individual or specific entity, and each party acknowledges
it has been advised to submit this Agreement to independent legal counsel before
signing it. There shall be no presumption in favor of or against any party with
regard to which party arranged for initial drafting of this Agreement.
7.13 Notices. Any notice required or desired to be given hereunder
shall be deemed given if personally delivered, or ninety-six (96) hours after
mailing (first class postage prepaid, return receipt requested), to the parties
at the following addresses, or at such other addresses as may be given by proper
notice:
7.13(a) Manager: Trendwest Resorts, Inc., 4010 Lake Washington,
Suite 210, Kirkland, Washington 98033.
With a copy to: John Rogers Burk, 2140 Professional Drive, Suite 120,
Roseville, California 95661.
-13-
<PAGE> 14
7.13(b) Club: Club Esprit., 4010 Lake Washington, Suite 210,
Kirkland, Washington 98033,
7.14 Parties In Interest. Unless specifically otherwise provided
herein, (a) nothing in this Agreement, whether express or implied, is intended
to confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties hereto; (b) nothing in this Agreement is intended
to relieve or discharge the obligation or liability of any third persons to any
party to this Agreement; and (c) nothing herein shall give any third person any
right of subrogation or action over or against any party to this Agreement.
7.15 Reasonableness. The parties recognize that this Agreement contains
conditions, covenants, and time limitations that are reasonably required for the
protection of the business of the parties or a particular party. If any
limitation, covenant or condition shall be deemed to be unreasonable and
unenforceable by a court or arbitrator of competent jurisdiction, then this
Agreement shall thereupon be deemed to be amended to provide for modification of
such limitation, covenant and/or condition to such extent as the court or
arbitrator shall find to be reasonable.
7.16 Records. Each party shall maintain books and records containing
all transactions in furtherance of this Agreement. Such books and records shall
be maintained in accordance with usual accounting methods. Either party shall
have the right, during normal business hours and upon reasonable notice, to
examine the books and records of the other party relating to this Agreement.
7.17 Remedies. No remedy conferred by any of the specific provisions of
this Agreement is intended to be exclusive of any other remedy given hereunder
or now or hereafter existing at law or in equity. The election of any one or
more remedies by any party shall not constitute a waiver of the right to pursue
other available remedies.
7.18 Severability. If any provision of this Agreement is held to be
unenforceable, invalid or illegal by any arbitrator or court of competent
jurisdiction, such shall not affect the remainder of this Agreement.
7.19 Successors. Subject to the paragraph regarding Assignment, this
Agreement shall be binding upon and benefit the heirs, legal representatives,
successors, and assigns of the parties.
7.20 Survival. All covenants and warranties hereunder shall survive the
recording of any document and the final payment hereunder, and some provisions
shall survive termination or expiration of this Agreement for a reasonable time
or for the specified time if necessary to carry out their reasonably intended
effect.
-14-
<PAGE> 15
7.21 Time. Time is of the essence of this Agreement, and any breach of
a time covenant or condition hereunder shall be deemed a material breach of this
Agreement, However, if any date or time referred to herein shall fall on
Saturday, Sunday, or a legal holiday, the date or time shall be extended to the
next regular business day.
7.22 Waiver. No waiver of enforcement or breach of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
person making the waiver.
7.23 Word Usage. Unless the context clearly otherwise requires, (a) the
plural and singular numbers or the masculine, feminine and neuter genders shall
each be deemed to include the others; (b) "shall", "will", or "agrees" are
mandatory, and "may" is permissive; (c) "or" is not exclusive; and (d)
"including" or "such as" is not limiting.
7.24 Exhibits. The following Exhibit is attached hereto and
incorporated herein by this reference:
A Club Budget
8: SIGNATURES: The individuals applying their signatures to this Agreement
warrant that they are signing in a representative capacity for a person or
entity whose name is set forth immediately above their signature, and that they
have been expressly authorized to sign the Agreement on behalf of such person or
entity.
CLUB: MANAGER:
WORLDMARK, THE CLUB, TRENDWEST RESORTS, INC.,
A California Nonprofit Mutual An Oregon Corporation
Benefit Corporation
By: ________________________ By: ________________________
J. Michael Moyer, William F. Peare,
Secretary President
-15-
<PAGE> 1
Exhibit 10.2
SOFTWARE SUPPORT AND MAINTENANCE AGREEMENT
THIS SOFTWARE SUPPORT AND MAINTENANCE AGREEMENT ("Agreement") is
entered into as of _________, 1994, by and between TRENDWEST RESORTS, INC.
("Trendwest"), and SAGE SYSTEMS, INC. ("Sage").
RECITALS
A. Sage has developed a computer software program, as more particularly
described in Exhibit A (the "Software").
B. Trendwest has obtained a non-exclusive, restricted joint ownership
interest in the Software from Sage pursuant to a Software Transfer Agreement
dated as of ________, 1994. Trendwest utilizes the Software in its business
operations. From time to time, Trendwest may require maintenance services from
Sage, may request upgrades, modifications or improvements to the Software, and
may request technical documentation relating to the Software.
C. Sage is willing to provide such maintenance and support to
Trendwest, and Trendwest is willing to accept such services, on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
AGREEMENT
1. Definitions.
1.1 "Improvement" means any change to the Software that results in a
material improvement in any major performance characteristic of the Software.
Improvements may be released as a "new version" of the Software.
1.2 "Modification" means any substantial change to the Software
corrects program errors ("bugs"), but has no effect or makes no change to the
performance characteristics of the Software. Modifications may be released as an
"upgrade" to the Software.
1.3 "Technical Documentation" means technical specifications and
performance descriptions (but not including confidential source code), together
with user documentation, all of which is sufficient to enable an experienced
computer analyst to use the Software without resort to assistance from Sage
customer support personnel.
2. Development of Modifications and Improvements
2.1 Modification. To the extent Sage creates, from time to time,
Modifications to the Software, Sage shall promptly transfer and otherwise
provide such Modifications to Trendwest for no additional charge or royalty
whatsoever.
-1-
<PAGE> 2
2.2 Improvements. To the extent Sage creates, from time to time,
Improvements to the Software, Sage shall promptly transfer and otherwise provide
such Improvements to Trendwest for no additional charge or royalty in excess of
the consideration required to be paid to Sage under this Agreement.
2.3 Support. Sage shall provide to Trendwest, upon request and at no
additional charge in excess of the consideration required to be paid to Sage
under this Agreement, reasonable customer service and other technical assistance
for the purpose of operating and fully utilizing the Software. Such assistance
shall include the provision of reasonable engineering and technical information
and support by telephone, and in person access to Sage's engineering personnel
at Sage's Bellevue, Washington office during normal business hours.
2.4 Technical Documentation. Sage shall use its commercially
reasonable best efforts to develop, draft and provide Trendwest, at no
additional charge in excess of the consideration required to be paid to Sage
under this Agreement, with copies of its Technical Documentation as revised and
updated from time to time.
3. Prices
3.1 Price for Improvements and Support. For and in consideration of
the services provided by Sage pursuant to Sections 2.2 and 2.3, Trendwest shall
pay Sage a monthly retainer of $2,000. Upon Trendwest's pre-approval, if, during
any one month, work performed by Sage solely on Improvements requested by
Trendwest exceeds 10 hours, Trendwest will pay Sage $50.00 per hour for each
hour worked during such month in excess of the initial 10 hours. Upon providing
Trendwest each such Improvement, Sage shall be deemed to have granted to
Trendwest a non-exclusive, restricted joint ownership interest in such
Improvement, consistent with the Software Transfer Agreement.
3.2 Price for Technical Documentation. For and in consideration of the
services provided by Sage pursuant to Section 4, Trendwest shall pay Sage a
total of $12,000 plus tax. Payment shall be made in monthly payments of $ 1,000,
plus tax. Sage acknowledges that Trendwest has already paid Sage, through July
1994, a total of $7,574 under this Section 5.2.
3.3 No Charge for Modifications. Sage shall provide any and all
Modifications to Trendwest without charge, and any and all such transfers with
respect to Modifications shall be deemed made consistent with the Software
Transfer Agreement.
(ii) Sage possesses all rights necessary to sell and transfer to
Trendwest any and all Modifications, Improvements and Technical Documentation,
and Sage rightfully holds all third party intellectual property rights (if any)
that may be from time to time incorporated in the Modifications, Improvements
and Technical Documentation.
-2-
<PAGE> 3
4.2 Intellectual Property Indemnification. Sage shall defend, indemnify
and hold harmless Trendwest from all claims of any kind whatsoever that arise
out of any infringement or claim of infringement of any intellectual property
rights. In the event any part of the Software, Modifications, Improvements or
Technical Documentation (collectively, the "Intellectual Property"), or the use
or operation thereof, becomes or in the opinion of Sage is likely to become, the
subject of a claim of infringement of a United States patent or copyright, Sage
at its option and expense either (A) shall procure for Trendwest the right to
continue using such part of the Intellectual Property, or (B) shall replace or
modify the same so that such part of the Intellectual Property becomes
non-infringing.
5. Term and Termination
5.1 Term. The term of this Agreement shall be for five years, but shall
be subject to the termination provisions of Section 7.2.
5.2 Termination. After the initial term of this Agreement, either party
may terminate this Agreement, without cause, upon ninety (90) days prior written
notice.
6. Miscellaneous
6.1 Complete Agreement; Amendment. Each party acknowledges that it has
read this Agreement, and the attached exhibits, it understands it, and agrees to
be bound by its terms, and further agrees that this is the complete and
exclusive statement of the Agreement between the parties. This Agreement, and
exhibits thereto, may not be modified or altered except by written instrument
duly executed by both parties Agreement between.
6.2 Governing Law. This Agreement and performance hereunder shall be
governed by the laws of the state of Washington.
6.3 Severability. If any provision of this Agreement is invalid under
any applicable statute or rule of law, it is to that extent only to be deemed
omitted.
6.4 Assignment. Trendwest may not assign, without the prior written
consent of Sage, this Agreement to any person or entity, in whole or in part,
which consent Sage may not unreasonably withhold; provided, however, that any
merge, consolidation, share exchange, sale of assets, or other transfer of
interest not in the ordinary course of Trendwest's business shall not require
the consent of Sage.
6.5 Enforcement Costs. To the extent that any party incurs expenses in
the enforcement of this Agreement, the substantially prevailing party shall be
entitled to collection attorney and experts' fees and expenses.
-3-
<PAGE> 4
6.6 No Waiver. The waiver or failure of either party to exercise in any
respect any right provided for herein shall not be deemed a waiver of any
further right hereunder.
6.6 Notice. All notices required or permitted to be given by one party
to the other under this Agreement shall be sufficient if sent by certified mail,
return receipt requested, to the parties at the respective addresses set forth
herein or to such other address as the party to receive notice has designated by
notice to the other party.
SAGE SYSTEMS, INC. TRENDWEST RESORTS, INC.
By_______________________ By__________________________
ADDRESS: ADDRESS:
-4-
<PAGE> 5
List of Exhibits
Exhibits Description
Exhibit A Description of Software
-5-
<PAGE> 6
INTEROFFICE MEMO
To: Lesley Phillips
From: Jim Mcbride
Subject: Software Agreement
Date: December 1, 1994
CC: Al Schriber, Jeff Sites
SOFTWARE NAME: TIME/CAMP
List of Modules.
1. Reservations
A. Control of inventory at multiple resorts.
B. Awards and tracks usage by points.
C. Monitors and controls direct exchange.
D. Monitors and enforces by-laws for owner use.
E. Invoicing for other owner charges.
2. Owner Processing
A. Contract Processing.
B. Cash Management and Pending.
C. Sales commissions.
D. Accounts Receivable.
E. Upgrades
3. Marketing
A. Prospect processing.
B. Tour processing.
C. Premium control.
D. Owner Referral.
E. Outbound Calling.
4. Sales
A. Tour Registration.
B. Salesman performance reporting.
C. Site performance reporting.
D. Program performance reporting.
<PAGE> 1
Exhibit 10.3
SERVICE AGREEMENT
This Agreement made and entered into the 1ST day of JANUARY 1996, in duplicate
original form, by and between Sage Systems, Inc., a Washington Corporation,
hereinafter referred to as "SAGE" and TRENDWEST RESORTS, INC., a CALIFORNIA
Corporation, hereinafter referred to as the "Client."
The Client does hereby appoint Sage as it's exclusive servicing agent for the
purpose of performing certain computer, accounting and other services specified
in this agreement with respect to CONTRACT SERVICING referred to herein as the
"ACCOUNT".
Sage agrees to act in the capacity of Servicing Agent for the Client, and shall
perform all services necessary to service the accounts of the Client.
1. Sage agrees to render the following services:
a) Prepare a suitable billing statement for each payment due for the
Client's individual account.
b) Mail billing statements no less than 12 days before accounts due
date.
c) Maintain adequate accounting and collection records on the
Client's receivable portfolio,
d) Prepare all weekly and monthly reports as listed on the attached
fee schedule.
2. Client agrees to supply Sage with adequate documentation to service
each account. Client also agrees that the documentation supplied will
be sent to Sage on a predetermined schedule to be agreed upon.
3. Sage agrees that all materials and information received by the Client
be held in strict confidence.
4. Client shall pay Sage consideration for services rendered based on the
fees set forth in the attached fee schedule. Sage shall invoice the
client at the end of each month for services rendered during that
month. Client agrees to pay in full each invoice within thirty (30)
days from the date on such invoice.
5. Washington State Escrow Fees and Audit Fees are included in the
servicing fees.
6. The term of this agreement shall be for a period of three (3) years
ending January 01, 1997 and shall be renewable by written agreement of
both parties. This agreement may be cancelled by mutual agreement of
both parties.
-1-
<PAGE> 2
7. This Agreement shall survive the sale, reorganization, merger or
division of the parties hereto and shall be performed and binding on
the surviving entity.
8. In the event any legal action is instituted between the parties to
enforce this Agreement, the prevailing party in such action shall be
awarded reasonable attorney's fees.
9. The Client agrees to indemnify Sage and hold them absolutely harmless
from any claims of third parties arising out of the contracts being
serviced and collected pursuant to the Agreement, except for claims
based on negligence of Sage.
10. This Agreement shall be governed by the laws of the State of
Washington.
In witness whereof the undersigned parties have hereunto duly executed
this Agreement this 1ST day of JANUARY, 1996.
WORLDMARK, THE CLUB SAGE SYSTEMS, INC.
(CLIENT)
BY:_________________________ BY:______________________
TITLE: TITLE:
-2-
<PAGE> 3
S A G E
2135 112th Avenue N.E., Suite 101
Bellevue, WA 98004
(206)451-2484. Fax 462-0264
SAGE SYSTEMS, INC.
FEE SCHEDULE
The following pricing information is for maintaining your accounts on Sage
Systems' computer system and the processing of all information necessary to
maintain a contract receivable and maintenance dues receivable system and any
up-to-dates to your files. Included in these costs are installment and dues
statements prepared and mailed each month along with the necessary reports
required by the customer.
A. CONTRACT RECEIVABLE (Any account with an open [remaining] principal
balance.
ACTIVE ACCOUNTS PRICE PER MONTH
15000 TO 20000 ACCOUNTS $1.90 EACH
20001 TO 30000 ACCOUNTS $1.80 EACH
30001 TO 40000 ACCOUNTS $1.75 EACH
B. DUES RECEIVABLE (Any account with a maintenance dues or association
requirements)
ACTIVE ACCOUNTS PRICE PER QUARTER
15000 TO 20000 ACCOUNTS $1.90 EACH
20001 TO 30000 ACCOUNTS $1.80 EACH
30001 TO 40000 ACCOUNTS $1.75 EACH
C. ADDITIONAL SERVICES
DESCRIPTION UNIT PRICE
CASH-OUT LETTER $ .55 EACH
DELINQUENCY NOTICES & LETTERS $ .55 EACH
WELCOME LETTERS $ .55 EACH
MAILING LABELS $ .55 EACH
NOTE: ALL THE ABOVE PRICES INCLUDE POSTAGE
-3-
<PAGE> 1
Exhibit 10.4
SOFTWARE TRANSFER AGREEMENT
This Software Transfer Agreement ("Agreement") is dated as of August
____, 1994 and is between and among Sage Systems, Inc. ("Sage"), James McBride,
Sr. ("Author") and Trendwest Resorts, Inc. ("Trendwest"). Author has created the
source code and object code for those certain software programs ("Software," as
more particularly described below). Author has transferred all right, title and
interest in and to the ownership of the Software to Sage, including without
limitation, all copyrights.
For the past several years, Trendwest has been licensing the Software
from Sage. Trendwest also has been obtaining Software support and maintenance
and certain contract services from Sage. Sage desires to transfer a
non-exclusive, restricted ownership interest in the Software to Trendwest, and
Trendwest desires to accept such ownership interest in the Software, on the
terms and conditions described herein.
For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree:
1. Definitions. The following definitions apply whenever the specified
terms are used in this Agreement or in any attachments to this Agreement:
a. "Affiliate" means Trendwest and Worldmark, The Club, a
California not for profit corporation, all parents, divisions, subsidiaries and
sister entities of either Trendwest or Worldmark, The Club, and any and all
joint ventures, partnerships, corporations, limited liability companies and all
other entities in which either of Trendwest or Worldmark, The Club own or
otherwise hold at least a ten percent (10%) interest.
b. "Confidential Information" means confidential information
relating to the Software, now existing or hereafter arising, which includes,
without limitation, research, developments, inventions, technical data, and any
and all other processes, formulae, marketing plans or proposals, customer lists
or other customer information, financial information, or any observations, data,
written material, records or documents. Confidential Information includes any
such information whether or not such information was developed, devised or
otherwise created in whole or in part by th efforts of Author, Sage or
Trendwest. Confidential Information shall not include matters of public
knowledge, unless either such matters become public knowledge as a result of
unauthorized disclosure to the general public, or the combination of such
matters would amount to Confidential Information.
c. "Intellectual Property Rights" mean all intellectual property
rights arising under federal, state or common law regarding the Software.
-1-
<PAGE> 2
d. "Know-How" means all information, now existing or hereafter
acquired, known to Author or Sage and related in any way to the Software,
including without limitation information directly or indirectly related to any
formula, method, procedure, process, design, or other subject matter that
contributes in whole or in part to the present or future development,
exploitation, utilization or understanding of the Software
e. "Software" means the computer software programs listed in
Exhibit A, together with all associated source codes, object codes
documentation, Intellectual Property Rights, Confidential Information, Know-How
and Trade Secrets.
f. "Trade Secrets" mean any and all Confidential Information that
is or would be a trade secret pursuant to RCW Chapter 19.108.
2. Transfer of Ownership Interest in the Software. Sage (and Author, to
the extent necessary to convey the interest being transferred to Trendwest
pursuant to this Section 2) hereby sells, conveys, assigns and otherwise
irrevocably transfers to Trendwest a non-exclusive ownership interest in and to
the Software.
a. Permitted Uses. Subject only to the restrictive uses set forth
in Section 2(b), Trendwest shall have full right, power and authority to
exercise its ownership interest as a joint owner of the Software, which
ownership interest shall include, without limitation, the rights to (a)
incorporate the Software into Trendwest operational and accounting systems, (b)
establish additional operational and accounting systems that incorporate the
Software, (c) use, service and support such systems which incorporate the
Software, and (d) modify the Software and create derivative works of the
Software, and manufacture such modified Software.
b. Restricted Uses. Trendwest may license the Software, and
manufacture operational and accounting systems that incorporate the Software for
further sale, but such sales, licenses or other transfers shall be made only to
related Trendwest entities and Affiliates. In particular, Trendwest shall not
engage in the business of mass marketing and licensing of the Software for
commercial purposes. Nothing in this Section 2(b) shall prohibit Trendwest from
transferring the Software to another unrelated entity in connection with a
merger, consolidation, share exchange, sale of assets, or other transfer of
interest not in the ordinary course of Trendwest's business.
3. Further Assurances. Author and Sage shall execute such additional
documents and take such reasonable further steps as may be necessary or
desirable to ensure that Trendwest shall have full joint ownership of the
Software as contemplated in this Agreement, including without limitation federal
copyright registrations of the Software.
-2-
<PAGE> 3
4. Miscellaneous
a Headings. The headings of the sections and paragraphs of this
Agreement are inserted for convenience only, and shall not control or affect the
meaning or construction of any of its provisions.
b. Waiver of Breach. The waiver of any breach of any provision of
this Agreement, or failure to enforce any provision hereof, shall not operate or
be construed as a waiver of any subsequent breach by any party.
c. Disputes. In any litigation or dispute arising out of this
Agreement, the substantially prevailing party will be entitled to recover all
reasonable costs and attorneys' fees, including costs and fees on appeal.
d. Rights Cumulative. The provisions of this Agreement shall not be
construed as limiting any rights or remedies that either party may otherwise
have under applicable law.
e. Severability. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of this Agreement or
the remainder of such section. If any provision of this Agreement is so broad as
to be unenforceable, such provision shall be interpreted to be only so broad as
is enforceable.
f. Governing Law. The rights and obligations under this Agreement
shall in all respects be governed by the laws of the State of Washington.
g. Integration. This Agreement constitutes the entire understanding
between the parties pertaining to the subject matter contained in it, and
supersedes all prior and contemporaneous agreements, representations and
understandings of the parties. This Agreement may not be altered, amended,
modified or otherwise changed in any respect whatsoever, except by a writing
duly executed by the parties.
DATED on the day first set forth above.
AUTHOR:
__________________________________
James McBride, Sr.
-3-
<PAGE> 4
SAGE:
SAGE SYSTEMS, INC.
By:_______________________________
Its____________________________
TRENDWEST:
TRENDWEST RESORTS, INC.
By________________________________
Its_____________________________
-4-
<PAGE> 1
Exhibit 10.5
------------------
ESCROW AGREEMENT
(Amended)
This Amended Agreement is dated for reference purposes and entered into
as of October 25, 1990 by TRENDWEST RESORTS, INC., an Oregon corporation,
("Developer"), CLUB ESPRIT, A California nonprofit mutual benefit corporation
("Club") and SAGE SYSTEMS, INC., a Washington corporation, ("Escrow Agent"), for
the purpose of amending, and restating in its entirety as amended, that Escrow
Agreement dated May 15, 1990.
1: RECITALS
1.1 Services. Escrow Agent agrees to provide escrow services to
Developer and Buyers of Memberships in Club.
1.2 Scope. This Escrow Agreement is part of each Membership Agreement
and Salesperson Agreement. The Developer, Escrow Agent and Developer's Sales
Agent(s) and the Members are bound by this Escrow Agreement.
1.3 Developer. Developer acquires Units in Resort Properties which it
transfers to Club for use in the Club Vacation Timeshare Program.
1.4 Club. Club holds and manages the Units for the benefit of the
Members. Membership in Club includes voting rights to elect directors and to
vote directly on certain Club decisions.
1.5 Timeshare Program Agreement. Under the Vacation Timeshare Program
Agreement made September 1, 1989 and amended February 27, 1990, Developer has
the exclusive right to market and sell all Memberships in Club and to receive
all the proceeds from Membership sales.
1.6 Declaration. Developer and/or Club has recorded or will record a
"Declaration of Vacation Timeshare Program (Club Esprit)" ("Declaration") with
respect to each Unit in the Program.
1.7 Escrow Account. As at registered time share plan under HRS Chapter
514E, and pursuant to other states' consumer protection requirements, the Funds
and Contract Documents associated with the purchase of Memberships must be
placed in an escrow account approved by the State of Hawaii for protection of
purchasers until certain events occur as described below, providing for the
release of those funds and documents to the Developer ("closing"), or the return
of those funds and documents to the purchaser ("no closing").
-1-
<PAGE> 2
1.8 Table of Contents
<TABLE>
<CAPTION>
Article/Section/Title Page
--------------------- ----
<S> <C> <C>
1: RECITALS......................................................... 1
1.1 Services................................................ 1
1.2 Scope................................................... 1
1.3 Developer............................................... 1
1.4 Club.................................................... 1
1.5 Timeshare Program Agreement............................. 1
1.6 Declaration............................................. 1
1.7 Escrow Account.......................................... 1
1.8 Table of Contents....................................... 2
2: DEFINITIONS...................................................... 3
2.1 "Buyer.................................................. 3
2.2 "Close" and "Closing.................................... 3
2.3 "Closing Costs.......................................... 3
2.4 "Contract Documents..................................... 3
2.5 "Declaration............................................ 3
2.6 "Funds.................................................. 3
2.7 "Hawaii Administrative Rules............................ 3
2.8 "HRS.................................................... 3
2.9 "Sales Contract......................................... 3
3: HANDLING FUNDS AND DOCUMENTS..................................... 3
3.1 Escrow Account.......................................... 3
3.2 Documents............................................... 4
3.3 Affiliates.............................................. 4
4: CLOSING.......................................................... 4
4.1 Closing Conditions...................................... 4
4.2 Closing Procedures...................................... 6
4.3 Release of Funds and Sales Contract without a
Closing................................................. 6
4.4 Release of Buyer's Funds................................ 6
5: GENERAL MATTERS.................................................. 7
5.1 Notice.................................................. 7
5.2 Interest................................................ 7
5.3 Indemnity............................................... 7
5.4 Copies of Documents..................................... 7
5.5 Cancellation Charge..................................... 7
5.6 Exhibit................................................. 8
</TABLE>
-2-
<PAGE> 3
2: DEFINITIONS. Unless the context otherwise specifies or requires, the
terms used in this Agreement shall have the meanings set forth in HRS or below
or in the recorded Declaration, in that order of preference.
2.1 "Buyer" means each person shown as a Buyer, Member or Purchaser in
a Sales Contract or Membership Agreement.
2.2 "Close" and "Closing" refer to completing the sale of and issuing a
Membership to a Buyer.
2.3 "Closing Costs" means all costs and expenses of closing a sale. It
includes, for example, if applicable: (a) Escrow Agent's fees, (b) notary fees,
(c) charges for credit reports, (d) costs of drafting documents, (e) financing
fees and costs, and/or (f) postage and handling fees.
2.4 "Contract Documents" means, for each Buyer, (a) this Escrow
Agreement, (b) the Buyer's Sales Contract or Membership Agreement, and (c) any
written changes to either of those documents if the changes have been signed by
the person whose duties are changed.
2.5 "Declaration" means the recorded Declaration of Vacation Timeshare
Program (Club Esprit), which creates the vacation timeshare program and makes
the respective Units subject thereto, and which constitutes a Notice of Time
Share Plan under HRS Chapter 514E.
2.6 "Funds" means any money, "negotiable instruments" and "purchase
money contracts" (as those terms are defined in HRS) received before closing
from or on behalf of any Buyer or potential Buyer.
2.7 "Hawaii Administrative Rules" means the rules and regulations
adopted under HRS by the State of Hawaii, as they may be revised from time to
time, as contained in Chapter 106 of Title 16 of the Regulations of the
Department of Commerce And Consumer Affairs of the State of Hawaii.
2.8 "HRS" means the Hawaii Time Share Law (Chapter 514E, Hawaii Revised
Statutes), as it may be revised from time to time.
2.9 "Sales Contract" means a Membership Agreement, a sample of which is
attached hereto as Exhibit "A", which may be revised from time to time by
Developer and Club, provided it is not inconsistent with the Declaration and
Governing Documents.
3: HANDLING FUNDS AND DOCUMENTS.
3.1 Escrow Account. All Funds and Sales Contracts received before
closing from or on behalf of Buyers or prospective Buyers in connection with the
purchase or reservation of a Membership must be placed in an escrow account with
Escrow Agent; however the
-3-
<PAGE> 4
Developer or a Sales Agent may hold until the expiration of the cancellation
period, or any longer cancellation period provided in the Sales Contract, Funds
or Sales Contracts made payable to the Escrow Agent.
3.2 Documents. The Escrow Agent will accept and hold any Funds, Sales
Contract, receipts for (a) the Hawaii Disclosure Statement and (b) the Notice of
Mutual Right of Cancellation, any closing statement and all other papers from
the Developer or any lender supplying money to the Buyer or for the Buyer. The
Escrow Agent will handle and deliver those documents as instructed by the person
who provided them and this Escrow Agreement.
3.3 Affiliates. Escrow Agent, Developer and Club may enter into
Affiliation Escrow Agreements with licensed escrow companies in states other
than Washington, if necessary to facilitate closings of sales in such states
and/or if required for compliance with timeshare sales laws, regulations and
regulatory policies.
4: CLOSING
4.1 Closing Conditions. Closing of the escrow for the sale of a
Membership shall not occur, and the Buyer's Funds and Sales Contract shall not
be delivered by the Escrow Agent according to paragraph 4.2, until after all of
the following have occurred:
(a) Cancellation Period. The "cancellation period" or rescission
rights period, prescribed by the state(s) where the sale is made and/or
advertised, has expired. At the date of this Agreement, Developer is now selling
or advertising, or may in the foreseeable future sell or advertise, in states or
provinces which prescribe the following cancellation periods:
(i) Arizona, midnight of the seventh (7th) calendar day
following the day on which the purchaser executed the Sales Contract, pursuant
to Title 32, Chapter 20, Arizona Revised Statutes, Section 32-2197.02;
(ii) British Columbia, seven (7) days after the later of the
purchaser signs the Sales Contract or the purchaser receives the required
prospectus, pursuant to the Real Estate Act, Revised Statutes, Chapter 356,
Section 63 (1.1).
(iii) California, midnight of the third (3rd) calendar day
after the Buyer executed the Sales Contract, pursuant to Business and
Professions Code Section 11024 and Title 10, California Code of Regulations,
Sections 2813.12 and 2813.13;
(iv) Hawaii, seven (7) calendar days after the Buyer's
execution of the Sales Contract or seven (7) calendar days after the Buyer's
receipt of the Hawaii Disclosure Statement, whichever occurs later, pursuant to
HRS Section 514E-8;
-4-
<PAGE> 5
(v) Nevada, midnight of the fifth (5th) calendar day
following the execution of the Sales Contract, pursuant to Chapter 119A. Nevada
Revised Statutes, Section 119A.410.
(vi) Oregon, midnight of the fifth (5th) calendar day from the
date the purchaser signs the Sales Contract, pursuant to Chapter 94, Oregon
Revised Statutes, Section 94.836.
(vii) Washington, within seven (7) days after receipt of the
disclosure document or the signing of the Sales Contract by Buyer, whichever is
later, pursuant to Chapter 64.36, Revised Code of Washington, Section
64.36.140(13).
(b) Notice of Cancellation. The Escrow Agent has received a sworn
statement from the Developer, signed by its duly authorized representative, that
no cancellation notice postmarked on a date within the cancellation period has
been received from the Buyer whose funds are being released; and that no
cancellation notice was otherwise received during the cancellation period from
the Buyer whose funds are being released.
(c) Declaration. The Escrow Agent shall have independently verified
that a Declaration has been recorded and remains in effect against every Club
Esprit Unit for which Memberships are being sold.
(d) Title Insurance. Escrow Agent shall have procured a policy of
title insurance insuring title to each Unit in Club for the market value at the
time of acquisition, and insuring that each and every person holding an interest
in a recorded blanket lien, as defined in applicable law, executes and records a
Nondisturbance Agreement as required by HRS Section 514E19(b)(2)(A) and as
defined in Sections 514E-20 and 514E-1, Escrow Agent must be satisfied that
appropriate blanket lien protections (nondisturbance covenants) are fully in
place.
(e) Cancellation by Developer. Developer has certified to the
Escrow Agent that it is not exercising its cancellation rights under HRS Section
514E-8 or any other applicable law.
(f) Receipt. Developer has provided the Escrow Agent with a copy of
the receipt for the Public Report, Disclosure Statement or other disclosure
documents required by the state where the sale is made, signed by the Buyer and
dated with the date that such disclosure document was received by the Buyer.
(g) Vacation Credits Available. The Escrow Agent shall have
determined that there are sufficient Vacation Credits available in the timeshare
program, The Escrow Agent may rely on a certification from Developer and Club as
to the allocations of Vacation Credits to respective Units as the Units are
transferred to the Club and dedicated to the Timeshare Program, Escrow Agent
shall prepare an audit report at least quarterly verifying the
-5-
<PAGE> 6
availability of unsold Vacation Credits, pursuant to the Audit Agreement dated
June 21, 1990 between Developer and Escrow Agent.
4.2 Closing Procedures. To close each sale, the Escrow Agent will:
(a) Date all documents; and
(b) Deliver a copy of the Membership Agreement and closing
statement to the Buyer; and
(c) Deliver the original of the Membership Agreement, any closing
statement and any other documents to, and do anything else reasonably required
by, the Developer or anyone else loaning money to the Buyer for the purchase;
and
(d) Pay, out of the funds in escrow and after Developer's approval,
all of the closing costs and additional charges; and
(e) Pay to the Developer all sums due it under the Sales Contract
less closing costs chargeable to Developer; and
(f) Refund any over-payment to the Buyer.
4.3 Release of Funds and Sales Contract without a Closing.
(a) Notice of Cancellation. If the Buyer or Developer gives a valid
Notice of Cancellation of the Sales Contract, under any applicable law, all of
the Buyer's Funds and Sales Contracts made by the Buyer shall be returned to the
Buyer within 15 days after the Notice of Cancellation is received.
(b) Termination of Contract. If the Buyer or Developer properly
terminates a Sales Contract pursuant to its terms, or if Developer or a
prospective Buyer terminates a reservation agreement, all of the Buyer's Funds
and Sales Contracts made by the Buyer shall be delivered in accordance with the
Contract or reservation agreement.
(c) Buyer Default. If the Buyer defaults in the performance of the
Buyer's obligations under the Sales Contract, all the Buyer's Funds and Sales
Contracts made by the Buyer shall be delivered in accordance with the Contract.
(d) Sworn Statements. If Developer fails to provide to Escrow
Agent, within ten (10) days after expiration of the cancellation period, any of
those items described in paragraphs 4.1(b), (e), (f) and (g) above, then all of
the Buyer's Funds and Sales Contracts made by the Buyer shall be returned to the
Buyer within 15 days.
4.4 Release of Buyer's Funds. This Escrow Agreement explicitly
prohibits the release of Buyer's funds from escrow to or
-6-
<PAGE> 7
for the benefit of the Developer or Sales Agent or anyone else (except by way of
refunds to the Buyer) in any circumstances other than those set forth in this
Article 4.
5: GENERAL MATTERS
5.1 Notice. Any notice from the Developer or the Escrow Agent to the
Buyer must be given by in writing. If more than one person is listed as the
Buyer on a Sales Contract, the notice may be given to or received from any one
of them. If the Buyer is a corporation or partnership, the notice may be
delivered or mailed to any officer or partner of the Buyer. Notices must be
personally delivered or mailed by certified (or registered mail, postage
prepaid, addressed to the person at the address shown for each on the Buyer's
Sales Contract. Any party may change its address by sending written notice of
the new address to the other. All notices are considered given when they are
deposited in the mail, first class postage prepaid, or when personally received.
5.2 Interest. Any interest earned on Funds placed with the Escrow Agent
will belong to Developer.
5.3 Indemnity. Developer agrees to indemnify the Escrow Agent for
losses it suffers as a result of performing its duties, except for losses due to
the Escrow Agent's negligence or misconduct.
5.4 Copies of Documents. Developer will provide Escrow Agent with
copies of title reports, recorded Declarations, blanket liens, Nondisturbance
agreements and any other documents required by the Escrow Agent to verify
statements made under paragraph 4,1(c) of this Agreement.
5.5 Cancellation Charge. Upon a cancellation, Developer must notify
Escrow Agent within ten (10) days of the date of deciding upon or receiving
notice of cancellation whether to deduct from the Buyer's monies a reasonable
charge for materials received by the Buyer and not returned, and the amount of
such charge. This charge will not exceed $25.00. If deducted the charge will be
remitted to Developer.
-7-
<PAGE> 8
5.6 Exhibit.
A - Membership Agreement
ESCROW AGENT: DEVELOPER:
SAGE SYSTEMS, INC., TRENDWEST RESORTS, INC.,
a Washington corporation an Oregon corporation
and Washington Licensed
Escrow Agent
By_______________________ By___________________________
W.J. O'Rourke, President William F. Peare, President
555 116th Ave. N.E. 4010 Lake Washington Blvd.
Suite 130 Suite 210
Bellevue, WA 98004 Kirkland, WA 98033
CLUB:
CLUB ESPRIT, a California
nonprofit mutual benefit
corporation
By______________________________
Jeffrey Sites, Secretary
4010 Lake Washington Blvd.
Suite 210
Kirkland, WA 98033
-8-
<PAGE> 9
EXHIBIT A
MEMBERSHIP AGREEMENT
(TO BE PROVIDED]
-9-
<PAGE> 1
Exhibit 10.6
SECURITY AGREEMENT
Vacation Credits Purchased: 6000
Owner Number: 01-0000
WorldMark, The Club, and Trendwest Resorts, Inc.
12301 N.E. 10th Place
Bellevue, WA 98005
Phone: (206) 990-2300
WORLDMARK, THE CLUB
RETAIL INSTALLMENT CONTRACT
VACATION OWNER AGREEMENT
(Washington)
WorldMark, The Club, a California mutual benefit corporation (Club), and
Trendwest Resorts, Inc., an Oregon corporation (TRI), agree to sell to the
undersigned Owner 6000 Vacation Credits and Membership in the Club as a (choose
one) Premier X or Standard __ Ownership, and Owner agrees to purchase and hold
the Vacation Credits and Membership on these terms and conditions:
A. BENEFITS AND NATURE OF OWNERSHIP
1. VACATION CREDIT OWNERSHIP.
As an Owner of Vacation Credits, Owner is a Member of Club and is entitled to:
(a) reserve the use of Club Resort Units; (b) vote for Club directors; (c) vote
on major Club decisions; and (d) through the Club, participate in the corporate
ownership of the real estate and other assets of the Club.
2. DURATION OF OWNERSHIP.
Ownership shall be effective from the date of issuance by Club. Premier
ownership is perpetual. Standard ownership expires 40 years after issuance.
HOWEVER THE OWNER HAS SEVEN CALENDAR DAYS AFTER SIGNING THIS AGREEMENT OR
RECEIVING THE WORLDMARK PUBLIC OFFERING STATEMENT, WHICHEVER EVENT LAST OCCURS,
TO RESCIND THIS AGREEMENT AND HAVE RETURNED ALL FUNDS PAID. THE REQUEST MUST BE
IN WRITING AND EITHER DELIVERED IN PERSON OR MAILED TO WORLDMARK.
3. TRANSFERABILITY OF VACATION CREDITS.
Vacation Credits may be transferred entirely or partially at any time during
their term and without limitation to the number of transfers, through sale,
gift, inheritance, dissolution of marriage or by any operation of law, subject
to the following terms: (a) a transfer fee of $150.00 has been paid to Club; (b)
all payments or charges due Club are current; (c) the Vacation Credits
transferred and the Vacation Credits retained, if any, must each be enough
-1-
<PAGE> 2
Vacation Credits to hold a Basic Membership in the Club at the then current
requirement, and (d) the transferee must satisfy all qualifications of an Owner
and Club's credit requirements. TRI and Club will not repurchase the Vacation
Credits or assist in locating a buyer.
B. ASSURANCE OF CONTINUED CLUB QUALITY
4. NO REDUCTION IN NUMBER AND QUALITY OF UNITS AND RESORTS.
Owner shall have access to all existing and future Resorts and Units owned or
operated by or associated with Club, wherever located, which have been
registered with the applicable,agencies where the properties are located. The
location and specific nature of Resorts and Units shall be subject to change by
the Club, but Club is obligated to continue to provide Resorts and Units
comparable to those available at the date of this Agreement, and sufficient
Units in reasonable locations to provide annual reservations for all issued
Vacation Credits.
5. PARTICIPATION OF OWNER IN GOVERNING CLUB.
The ARTICLES and BYLAWS of Club provide for: (a) meetings and votes by Owners;
(b) election and meetings of, and limitation on powers of, directors; (c)
assessment of annual dues and special assessments; (d) enforcement and
discipline procedures; (e) appointment of officers and their duties; and (f)
insurance.
6. ULTIMATE CONTROL OF PROPERTIES BY CLUB.
The Club shall hold the deed or the lease to each Unit free of the effects of
debt encumbrances, and subject to a DECLARATION OF VACATION OWNER PROGRAM which
(a) shall be recorded or filed against each Unit; (b) provides for dedication of
the Unit to the Vacation Owner Program; and (c) establishes the Vacation
Credits.
7. GUIDELINES (RULES) SUPPORTING OWNER SATISFACTION.
Guidelines (Rules) may be adopted and amended from time to time by Club for
benefit of Owners and the management of the Resorts, whether general rules or
rules applicable to a specific location only, which may govern Owner usage of
Resort Units in the following subjects, among others: (a) reservations; (b)
number of occupants; (c) guest policies; (d) fees; (e) rental of Units by Club
to nonowners when not in use by Owners; (f) charges for use of specific
facilities; (g) personal conduct and behavior; (h) check-out times; (i) care and
maintenance of Units and facilities, and (j) conditions for the use and purchase
of Bonus Time. A copy of the current Guidelines (Rules) is provided herewith.
8. PROFESSIONAL DEVELOPMENT AND MANAGEMENT OF CLUB.
TRI has developed Club and acquired certain Resort properties which it has
transferred to Club in exchange for the proceeds of sale as well as exclusive
marketing rights, and the right to add additional
-2-
<PAGE> 3
properties under the same conditions. TRI will also manage Club and Club
properties under a Management Agreement with Club.
C. VACATION CREDIT USE
9. VACATION CREDITS PROGRAM.
The benefits and obligations of Ownership are determined by the number of
Vacation Credits purchased.
(a) Use. Vacation Credits, up to the amount purchased, may be used for
all nights and all seasons and at all Resorts on a space available
basis, but the number of Credits required for occupancy will be based
on factors such as the season, location, Unit size and type, and day of
the week.
(b) Issuance. Vacation Credits are renewed annually throughout the term
of the Ownership, at the beginning of Owner's Anniversary Year, in the
total amount purchased by Owner.
(c) Banking (carry-over) Credits. Vacation Credits which remain unused
at the end of each Anniversary Year will automatically carry over for
use during the following year, and will expire at the end of that year.
Use will be charged first against any carry-over Vacation Credits and
then against the current year's Credits. Credits might also be carried
over for future use with an exchange organization.
(d) Borrowing Future Credits. Owner may use Vacation Credits one
Anniversary Year in advance by borrowing against the following year's
assignment of Credits if Owner has paid his or her Club dues for the
following year. (e)Additional Credits. Owner may purchase additional
Vacation Credits in increments of 1000 at any time after the date of
this Agreement, subject to the following: (i) the Credits are
available; (ii) Owner is not in default under this Agreement; and (iii)
the then current price is paid.
10. VACATION CREDITS PURCHASED.
Owner is currently purchasing the number of Vacation Credits shown on page one.
11. BONUS TIME.
Premier Owners may purchase additional reserved time, referred to as Bonus Time.
Conditions for purchase and use of Bonus Time are determined by space
availability and Club Guidelines (Rules), which are subject to change.
D. QUALIFICATIONS AND CONDITIONS TO PURCHASE VACATION CREDITS
12. LEGAL CAPACITY.
Owner represents that Owner is a person or entity with the legal capacity to
enter into this Agreement.
13. NON-INVESTMENT PURCHASE.
-3-
<PAGE> 4
Owner represents that Owner is purchasing Vacation Credits for the purpose of
recreational and social use, and not for financial profit.
14. CREDIT REQUIREMENT.
Owner shall satisfy Club's reasonable credit requirements for purchase to be
accepted.
E. CONTRACTUAL STANDARDS
15. LIABILITY LIMITATIONS.
Owner agrees that Owner and Owner's family or guests assume all risks of loss or
damage to persons or property in using the Resorts, except that this limitation
of liability shall not apply in cases of negligence of the Resort, the Club or
TRI. Owner also agrees to maintain liability and property damage insurance in
connection with any motor vehicle(s) brought to the Resorts, in amounts
customarily carried on such vehicle(s). Liability for breach of any warranty
under this Agreement shall not exceed the amounts Owner has paid Club under this
Agreement.
16. EVENTS OF DEFAULT
Each of the following constitutes an Event of Default by Owner if not cured (a)
within 30 days from the due date, (b) within 30 days from giving of written
notice by Club or TRI as to a breach by omission or inaction, or (c) upon
continued active breach or violation after receipt of a written notice or
warning thereof, which notice or warning shall include the details of the
default and how the default may be remedied, if at all, within a specified
reasonable period (whichever of the foregoing is most applicable): (i) not
paying a purchase price installment, the annual dues or installment thereof, or
any other charge of Club when due; (ii) transfer of Vacation Credits, whether
voluntarily or involuntarily, except as specifically allowed herein; (iii)
misrepresentation or omission of a material fact in connection with this
Agreement or the extension of credit hereunder; or (iv) material breach of a
provision of this Agreement, the Guidelines (Rules) of Club, or the rules of a
company with which Club has exchange arrangements.
17. REMEDIES/SECURITY INTEREST.
No waiver by Club, TRI or any Holder or Co-Holder of this Agreement, of any
default or breach by Owner shall operate as a waiver of the same or any other
default or breach by Owner or any other Owner in the future. Each Owner signing
below hereby appoints each other Owner signing below as his or her agent for
dealing with the Holder of this Agreement for any purpose. Upon the occurrence
of an Event of Default, Club or the Holder of this Agreement may choose one or
more of the following remedies: (a) declare the entire unpaid balance of the
Cash Price immediately due, unless prohibited by law; (b) foreclose the lien
created by the grant of the security interest and sell or retain the Vacation
-4-
<PAGE> 5
Credits in satisfaction of owners obligations hereunder, or exercise any other
right under the Uniform Commercial Code, Division 9 (To secure compliance with
his or her obligations hereunder, Owner hereby grants to Club and TRI security
interests in the Vacation Credits and any proceeds therefrom, which Vacation
Credits were purchased under this Agreement. These security interests constitute
liens on the Vacation Credits and any proceeds therefrom. These security
interests and liens shall remain in effect as long as there are obligations of
Owner to be fulfilled under this Agreement.); (c) terminate the Vacation Credits
and retain all amounts previously paid by owner as compensation for damages
incurred in proceeding pursuant to this Agreement (Club, TRI and Owner agree
that in such case it would be impractical or extremely difficult to fix the
actual damage.); (d) suspend use rights; (e) sue for the unpaid balance due
hereunder; and/or (f) pursue any other remedy allowed by law, except Club cannot
terminate this Agreement or foreclose against the Vacation Credits without the
consent of the Holder of any right to the unpaid purchase price hereunder.
18. ADDITIONAL CREDITOR.
The right to receive payment of the purchase price under this Agreement belongs
to TRENDWEST RESORTS, INC., but could be assigned to another creditor.
NOTICE:
ANY HOLDER OF This CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR (OWNER) COULD ASSERT AGAINST THE SELLER OF GOODS OR
SERVICES OBTAINED PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY
HEREUNDER BY THE DEBTOR (OWNER) SHALL NOT EXCEED AMOUNTS PAID BY THE DEBTOR
(OWNER) HEREUNDER.
19. GENERAL PROVISIONS.
Any written notice required or desired to be given hereunder shall be deemed
given when personally delivered or upon deposit in the U.S. Mail, first class
postage prepaid, addressed to the address given herein or such subsequent
address as is given by proper notice. This Agreement, and any and all other
documents executed at the same time as this Agreement, constitute the entire
agreement between the parties hereto. No representation or warranties, oral or
written, other than the representations set forth in said documents, have been
relied upon by the parties. This Agreement shall be binding upon and benefit the
heirs, executors, administrators and successors of each of the parties. If any
provision of this Agreement shall be found to be invalid, the remaining
provisions shall nevertheless remain in full force and effect. This Agreement
shall survive the issuance of Vacation Credits and shall survive the final
payment toward the purchase hereunder.
20. PURCHASER RESPONSIBILITY.
-5-
<PAGE> 6
Transfer or abandonment of Vacation Credits does not relieve Owner of Owner's
obligations hereunder unless such transfer or termination of this Agreement is
agreed to by the Club and the holder of any right to the unpaid purchase price
under this Agreement.
F. CLUB CHARGES
21. ANNUAL DUES.
The beginning annual dues for these Vacation Credits is $309.00 (U.S. Funds),
based on the formula and rate of annual dues currently established by Club. The
annual dues shall be paid in advance on a quarterly basis beginning 9/01/96.
Such dues shall be used first for maintenance and operation of Resort Units,
then for other expenses authorized in the Club Bylaws. Annual dues may be
increased annually subject to Club Bylaws.
22. SPECIAL ASSESSMENTS AND TAXES.
Club may levy special assessments subject to Club Bylaws. The Owner is also
responsible for any tax that might be assessed by a civil taxing authority on
the purchase or use of the facilities.
23. EXTRA USE CHARGES.
Owner must pay separately for extra benefits including, but not limited to, if
available, food, storage, extra maid service, purchase of goods, use of
equipment, furnishings or facilities not normally provided as part of the Unit
or Resort facilities, and exchange program services if available.
24. DAMAGE CHARGES.
Owner must pay any cost of repair or replacement for any damage caused by Owner,
Owner's family or guests.
G. PURCHASE PRICE, FINANCE CHARGE, AND PAYMENTS
25. PURCHASE PRICE.
Owner agrees to pay TRI the purchase price of $7,800.00 (U.S. Funds), together
with the credit service charge (Finance Charge) stated below. Payments shall be
credited first on the interest then due, then on principal. Payments shall not
begin prior to thirty (30) days after signing of this Agreement by Club. The
interest (Finance Charge) shall begin to accrue on the date thirty (30) days
prior to the due date of the first monthly payment.
Disclosures Required By: Federal Truth in Lending Act, and State Law.
Creditors: WORLDMARK, THE CLUB and TRENDWEST RESORTS, INC.; 12301 N.E. 10th
Place, Bellevue, WA 98005
-6-
<PAGE> 7
<TABLE>
<CAPTION>
ANNUAL PERCENTAGE FINANCE CHARGE AMOUNT TOTAL OF TOTAL SALE
RATE The dollar amount the FINANCED PAYMENTS PRICE
The cost of your credit as a credit will cost you:
yearly rate: The amount of credit The amount you The total cost of your
provided to you or on will have paid purchase on credit
your behalf: after you have including your
made all payments downpayment of:
as scheduled:
<S> <C> <C> <C> <C>
$750.00
-------
14.9% $4,344.34 $7,050.00 $11,394.34 $12,144.34
- ----- --------- --------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
No. of Payments: Amount of Each Payment: Payments are due monthly, on
the same date each month
<S> <C> <C>
84 $135.65
Beginning: 8/15/96
</TABLE>
Security: You are giving the Club and TRI a security interest in the
Vacation Credits being purchased.
Prepayment: If you prepay the balance due, there will be no penalty.
Late Charge: Owner will be charged a late charge of $5.00 for each
payment or charge that is more than 10 days late, to
compensate Club or TRI for additional carrying and
collection costs.
Variable Rate: The Annual Percentage Rate disclosed above will
automatically increase by 1 Percentage Point (which is the
maximum increase) in the event any one of the following
occurs: (a) you discontinue participation in our
preauthorized check (PAC) plan, (b) your financial
institution is unable to participate, or (c) we discontinue
your participation for a reasonable cause. The Annual
Percentage Rate will not increase above 14.9%. An increase
in the Annual Percentage Rate would increase your monthly
payment by not more than $10.00
Contract
Reference: You should refer to this Agreement for information about
nonpayment, default and the right to accelerate maturity of
your payment obligation.
ITEMIZATION OF AMOUNT FINANCED
-7-
<PAGE> 8
<TABLE>
<S> <C> <C> <C>
1. Cash Price: $7,800.00 4. Total Cash Price: $7,800.00
--------- ---------
- -------------------------------------------------------------------------------
2. Other Credits $0.00 5. Downpayment: $750.00
----- -------
- -------------------------------------------------------------------------------
2. State and Local Taxes: $0.00 6. Amount Financed: $7,050.00
----- ---------
===============================================================================
</TABLE>
OWNER ACKNOWLEDGES THAT THE OWNER HAS RECEIVED A COMPLETED COPY OF THIS
AGREEMENT, REQUIRED PUBLIC OFFERING STATEMENT, CLUB ARTICLES, CLUB BYLAWS,
DECLARATION PROTOTYPE AND GUIDELINES, AND THAT THE OWNER HAS BEEN GIVEN A
SATISFACTORY OPPORTUNITY TO READ THIS AGREEMENT.
NOTICE TO BUYER (OWNER):
(A) DO NOT SIGN THIS CONTRACT BEFORE YOU READ IT OR IF ANY SPACES INTENDED FOR
THE AGREED TERMS, EXCEPT AS TO UNAVAILABLE INFORMATION, ARE BLANK. (B) YOU ARE
ENTITLED TO A COPY OF THIS CONTRACT AT THE TIME YOU SIGN IT. (C) YOU MAY AT ANY
TIME PAY OFF THE FULL UNPAID BALANCE DUE UNDER THIS CONTRACT, AND IN SO DOING
YOU MAY RECEIVE A PARTIAL REBATE OF THE SERVICE CHARGE. (D) THE SERVICE CHARGE
DOES NOT EXCEED 14.9%. (MUST BE FILLED IN) PER ANNUM COMPUTED MONTHLY.
- ------------------------------ -------------------------------
Owner Date Signed Owner Name
- ------------------------------ -------------------------------
Owner Date Signed Street Address
TRENDWEST RESORTS, INC. and WORLDMARK, THE CLUB
- ------------------------------- --------------------------------
Authorized Agent Date Signed Phone (area code)
-8-
<PAGE> 1
CHAPMAN AND CUTLER DRAFT
OF APRIL 18, 1996
INDENTURE
among
TRI FUNDING COMPANY I, L.L.C.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer")
and
LASALLE NATIONAL BANK
("Trustee")
Dated as of March 1, 1996
Providing for
$70,000,000
7.42% Receivables-Backed Notes, Series 1996-1
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION DESCRIPTION PAGE
<S> <C> <C>
Parties.....................................................................1
Preliminary Statement.......................................................1
Granting Clause.............................................................1
ARTICLE ONE DEFINITIONS .................................2
Section 1.01 Definitions .................................2
ARTICLE TWO NOTE FORM ..................................16
Section 2.01 Form .......................................16
ARTICLE THREE THE NOTES ..................................17
Section 3.01 Denomination ...............................17
Section 3.02 Execution, Authentication, Delivery
and Dating .................................17
Section 3.03 Notes as Debt ..............................17
Section 3.04 Registration, Registration of Transfer
and Exchange ...............................17
Section 3.05 Limitation on Transfer and Exchange ........18
Section 3.06 Mutilated, Destroyed, Lost or Stolen
Notes ......................................19
Section 3.07 Payment of Principal and Interest;
Principal and Interest Rights
Preserved ..................................20
Section 3.08 Persons Deemed Owner .......................21
Section 3.09 Cancellation ...............................21
ARTICLE FOUR ORIGINAL ISSUANCE OF NOTES; SUBSTITUTIONS OF
COLLATERAL .................................22
Section 4.01 Conditions to Original Issuance of
Notes ......................................22
Section 4.02 Security for Notes .........................23
Section 4.03 Substitution and Purchase of
Receivables; Upgrade Contracts .............24
Section 4.04 Releases ...................................26
Section 4.05 Trust Estate ...............................26
Section 4.06 Notice of Release ..........................26
Section 4.07 Opinions as to Trust Estate ................27
ARTICLE FIVE SATISFACTION AND DISCHARGE .................27
Section 5.01 Satisfaction and Discharge of Indenture ....27
-i-
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE SIX DEFAULTS AND REMEDIES 28
Section 6.01 Events of Default ..........................28
Section 6.02 Acceleration of Maturity; Rescission
and Annulment ..............................29
Section 6.03 Collection of Indebtedness and Suits
for Enforcement by Trustee .................30
Section 6.04 Remedies ...................................30
Section 6.05 Optional Preservation of Trust Estate ......31
Section 6.06 Trustee May File Proofs of Claim ...........31
Section 6.07 Trustee May Enforce Claims Without
Possession of Notes ........................32
Section 6.08 Application of Money Collected .............33
Section 6.10 Unconditional Right of Noteholders to
Receive Principal and Interest .............34
Section 6.11 Restoration of Rights and Remedies .........34
Section 6.12 Rights and Remedies Cumulative .............34
Section 6.13 Delay or Omission; Not Waiver ..............35
Section 6.14 Control by Noteholders .....................35
Section 6.15 Waiver of Past Defaults ....................35
Section 6.16 Undertaking for Costs ......................36
Section 6.17 Waiver of Stay or Extension Laws ...........36
Section 6.18 Sale of Trust Estate .......................36
Section 6.19 Action on Notes ............................37
ARTICLE SEVEN THE TRUSTEE ................................38
Section 7.01 Certain Duties and Responsibilities ........38
Section 7.02 Notice of Default ..........................40
Section 7.03 Certain Rights of Trustee ..................40
Section 7.04 Not Responsible for Recitals or
Issuance of Notes ..........................41
Section 7.05 May Hold Notes .............................42
Section 7.06 Money Held in Trust ........................42
Section 7.07 Compensation and Reimbursement .............42
Section 7.08 Corporate Trustee Required;
Eligibility ................................43
Section 7.09 Resignation and Removal; Appointment
of Successor ...............................43
Section 7.10 Acceptance of Appointment by Successor .....44
Section 7.11 Merger, Conversion, Consolidation or
Succession to Business of Trustee ..........44
Section 7.12 Co-Trustees and Separate Trustees ..........45
Section 7.13 Rights with Respect to the Servicer ........46
Section 7.14 Appointment of Authenticating Agent ........46
Section 7.15 Custodian to Hold Contracts ................47
ARTICLE EIGHT OPTIONAL PURCHASE OF RECEIVABLES ...........48
Section 8.01 Optional Purchase of All Receivables .......48
-ii-
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE NINE SUPPLEMENTAL INDENTURES ....................48
Section 9.01 Supplemental Indentures Without
Consent of Noteholders .....................48
Section 9.02 Supplemental Indentures with Consent
of Noteholders .............................49
Section 9.03 Execution of Supplemental Indentures .......50
Section 9.04 Effect of Supplemental Indentures ..........50
Section 9.05 Reference in Notes to Supplemental
Indentures .................................50
ARTICLE TEN REDEMPTION OF NOTES ........................51
Section 10.01 Redemption at the Option of the
Issuer; Election to Redeem .................51
Section 10.02 Notice to Trustee ..........................51
Section 10.03 Notice of Redemption by the Issuer .........51
Section 10.04 Deposit of the Redemption Price ............52
Section 10.05 Notes Payable on Redemption Date ...........52
ARTICLE ELEVEN REPRESENTATIONS, WARRANTIES AND COVENANTS ..52
Section 11.01 Representations and Warranties .............52
Section 11.02 Covenants ..................................56
Section 11.03 Other Matters as to the Issuer .............62
ARTICLE TWELVE ACCOUNTS AND ACCOUNTINGS ...................62
Section 12.01 Collection of Money ........................62
Section 12.02 Collection Account .........................62
Section 12.03 Reserve Account ............................65
Section 12.04 Reports by Trustee to Noteholders ..........67
ARTICLE THIRTEEN PROVISIONS OF GENERAL APPLICATION ..........68
Section 13.01 Acts of Noteholders ........................68
Section 13.02 Notices, etc., to Trustee, Issuer,
Servicer and the Rating Agency .............68
Section 13.03 Notices and Other Documents to
Noteholders; Waiver ........................69
Section 13.04 Effect of Headings and Table of
Contents ...................................69
Section 13.05 Successors and Assigns .....................70
Section 13.06 Separability ...............................70
Section 13.07 Benefits of Indenture ......................70
Section 13.08 Legal Holidays .............................70
Section 13.09 Governing Law ..............................70
Section 13.10 Counterparts ...............................70
Section 13.11 Obligation .................................70
Section 13.12 Compliance Certificates and Opinions .......70
Section 13.13 Effective Date of Transactions .............71
Signatures.................................................................72
-iii-
</TABLE>
<PAGE> 5
EXHIBIT A Form of Investment Letter
EXHIBIT B Form of Supplement for Grant of Substitute Contracts
and Upgrade Contracts
EXHIBIT C Form of Note
SCHEDULE A Contract Schedule
SCHEDULE B Members of the Issuer and Encumbrances on the
Membership Interests of the Members of the Issuer
SCHEDULE C Pool Information
-iv-
<PAGE> 6
INDENTURE, dated as of March 1, 1996 (herein, as amended and
supplemented from time to time as permitted hereby, called this "Indenture"),
among TRI FUNDING COMPANY I, L.L.C., a Delaware limited liability company
(herein, together with its permitted successors and assigns, called the
"Issuer"), TRENDWEST RESORTS, INC., an Oregon corporation, as servicer (herein,
together with its permitted successors and assigns, called the "Servicer"), and
LASALLE NATIONAL BANK, a nationally chartered bank, as trustee (the "Trustee").
PRELIMINARY STATEMENT
The Issuer has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Issuer's 7.42% Receivables-Backed
Notes, Series 1996-1 (the "Notes"). All covenants and agreements made by the
Issuer, the Servicer and the Trustee herein are for the benefit and security of
the Holders of the Notes. The Issuer, the Servicer and the Trustee are entering
into this Indenture, and the Trustee is accepting the trusts created hereby, for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged.
All things necessary to make this Indenture a valid agreement of the
Issuer, the Servicer and the Trustee in accordance with its terms have been
done.
GRANTING CLAUSE
To secure the payment of the principal of and interest on the Notes in
accordance with their terms, the payment of all of the sums payable under this
Indenture and the performance of the covenants contained in this Indenture, the
Issuer hereby Grants to the Trustee, solely in trust and as collateral security
as provided in this Indenture, for the ratable benefit of the Holders of the
Notes, all of the Issuer's rights, title and interest in and to the following
whether now owned or hereafter acquired and any and all benefits accruing to the
Issuer from: (a) the Receivables and Contracts, including all proceeds of the
Contracts and Receivables and all payments received on or with respect to the
Contracts and Receivables and due after the CutOff Date; (b) the Contract Files
and the Custodian Files; (c) the Issuer's rights and interests in the related
Credits; (d) the Receivables Purchase Agreement; (e) the Sale Agreement; (f) the
Servicing Agreement; (g) all amounts from time to time on deposit in the
Collection Account, the Clearing Account, the Distribution Account and the
Reserve Account (including any Eligible Investments and other property in such
accounts); and (h) proceeds of the foregoing (including, but not by way of
limitation, all cash proceeds, accounts, accounts receivable, notes, drafts,
acceptances, chattel paper, checks, deposit accounts, insurance proceeds,
condemnation awards, rights to payment of any and every kind, and other forms of
obligations and receivables which at any time constitute all or part or are
included in the proceeds of any of the foregoing) (all of the foregoing being
hereinafter referred to as the "Collateral" or "Trust Estate").
<PAGE> 7
The Trustee acknowledges such Grant, accepts the trusts hereunder in
accordance with the provisions hereof and agrees to perform the duties herein
required to the best of its ability to the end that the interests of the
Noteholders may be adequately and effectively protected.
ARTICLE ONE
DEFINITIONS
Section 1.01 Definitions. Except as otherwise expressly provided herein
or unless the context otherwise requires, the following terms have the
respective meanings set forth below for all purposes of this Indenture, and the
definitions of such terms are equally applicable both to the singular and plural
forms of such terms.
"Acquisition Consideration": The meaning specified in the Receivables
Purchase Agreement.
"Act": With respect to any Noteholder, the meaning specified in Section
13.01.
"Affiliate": At any time, and with respect to any Person, (a) any other
Person that at such time directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such first Person, and (b) any Person beneficially owning or holding, directly
or indirectly, 10% or more of any class of voting or equity interests of such
first mentioned Person or any Person of which such first mentioned Person
beneficially owns or holds, in the aggregate, directly or indirectly, 10% or
more of any class of voting or equity interests. As used in this definition,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Aggregate Collateral Value": As of any date, the sum of the aggregate
of the Collateral Values outstanding at such date; provided, however, that the
Collateral Value of any Defaulted Contract shall not be included in the
calculation of Aggregate Collateral Value in any Due Period after the Due Period
in which such Contract became a Defaulted Contract.
"Asset Assignment": The meaning specified in the Receivables Purchase
Agreement.
"Assignment": The meaning specified in the Sale Agreement.
"Authenticating Agent": Any entity appointed by the Trustee pursuant to
Section 7.14 hereof.
"Board of Directors": Either the board of directors of the Issuer or of
the Servicer, as the context requires, or any duly authorized committee of such
Board.
-2-
<PAGE> 8
"Board Resolution": A copy of a resolution delivered to the Trustee and
certified by the Secretary or an Assistant Secretary of the Servicer or a
corporate member of the Issuer, as the case may be, to have been duly adopted by
its respective Board of Directors and to be in full force and effect on the date
of such certification.
"Business Day": Any day other than a Saturday, a Sunday or a day on
which banking institutions in New York City or in the city in which the
corporate trust office of the Trustee is located are authorized or obligated by
law or executive order to close.
"Calculation Date": The last day of a Due Period.
"Cash Accumulation Event": The occurrence of any of the following
events or conditions: (i) as of any Calculation Date, the average Delinquency
Level for the immediately preceding three Due Periods ending on such Calculation
Date is greater than or equal to 8.0%, (ii) as of any Calculation Date, the
average Default Rate for the immediately preceding three Due Periods ending on
such Calculation Date is greater than or equal to 0.6% or (iii)(a) the Issuer
and Trendwest shall have failed to cause SeaFirst Bank, as agent under the
Receivables Transfer Agreement ("SeaFirst"), to execute and deliver to the
Trustee (and the Issuer promptly shall cause a copy thereof to be sent to each
Noteholder) an estoppel and subordination agreement reasonably satisfactory in
form and substance to the Holders of not less than 66-2/3% in aggregate
principal amount of the Notes Outstanding with respect to the Contracts listed
on Schedule A hereto and the related Collateral as of the Closing Date (the
"Initial Collateral") substantially to the effect that (unless the Holders of
not less than 66-2/3% in aggregate principal amount of Notes Outstanding
otherwise agree) SeaFirst has no ownership interest, security interest or other
interest in the Initial Collateral, and, in the event that Seafirst at any time
in the future obtains any such interest, such interest of Seafirst shall be
subordinate and inferior to the interest of the Trustee in the Initial
Collateral and that in no event shall SeaFirst enforce any rights, whether as
secured party or otherwise, against the Initial Collateral until all of the
Issuer's obligations in respect of the Notes and the other Transaction Documents
have been paid in full (nothing in this clause shall be deemed to permit the
Issuer, Trendwest or any other Person to grant an interest in the Initial
Collateral to SeaFirst or any other Person unless first released from the lien
of the Trustee under this Indenture) and (b) the stockholders' equity of the
Servicer and its consolidated subsidiaries, determined in accordance with
generally accepted accounting principles, as would be shown on a consolidated
balance sheet for such Persons, is at any time below $15,000,000; provided,
however, that this clause (iii) not apply during the sixty days immediately
succeeding the Closing Date.
"Cash Accumulation Event Period": Each period commencing at the
beginning of a Due Period in which any Cash Accumulation Event occurs and ending
immediately prior to the beginning of the first subsequent Due Period during
which no Cash Accumulation Event occurs. For purposes of this definition, a Cash
Accumulation Event shall be deemed to occur during a Due Period if as of the
Calculation Date occurring on the last day of such Due Period there is an
occurrence or existence of a Cash Accumulation Event.
"Clearing Account Bank": The meaning specified in the Servicing
Agreement.
-3-
<PAGE> 9
"Clearing Account": The meaning specified in the Servicing Agreement.
"Closing Date": April 19, 1996, the date that the Transaction Documents
are originally executed and delivered by the parties thereto.
"Club" or "WorldMark": WorldMark, the Club, a California mutual benefit
corporation, and its successors in interest.
"Code": The Internal Revenue Code of 1986, as amended.
"Collateral": The meaning specified in the Granting Clause of this
Indenture.
"Collateral Value": With respect to each Receivable as of any
Calculation Date, the amount of principal outstanding with respect to such
Receivable at the end of such Calculation Date (without giving effect to any
write-off or writedown of such Receivable).
"Collection Account": The account or accounts created and maintained
pursuant to Section 12.02 hereof.
"Competitor" shall mean any Person which is engaged in the vacation
time share business.
"Contract Files": The meaning specified in the Sale Agreement.
"Contract Schedule": The listing of Contracts and Receivables on
Schedule A hereto, which shall include with respect to each Contract listed on
such schedule: (a) a number identifying such Contract, (b) the Collateral Value
of the related Receivable as of the date of execution and as of the CutOff Date,
(c) the Obligor, (d) the date entered into, (e) the original term and the number
of payments made as of the Cut-Off Date, (f) the Scheduled Payment, (g) the
interest rate and (h) the number of Credits financed, as such schedule may be
amended upon any purchase or substitution of Contracts made in accordance with
the terms of the Transaction Documents.
"Contracts": The retail installment contracts (and all rights with
respect thereto, including all guaranties and other agreements or arrangements
of whatever character from time to time supporting or securing payment of any
such contract and all rights with respect to the Credits to the extent
specifically related to any such contract), certain interests in which are
acquired by the Issuer from time to time pursuant to the Sale Agreement and
identified on the Contract Schedule attached hereto as Schedule A, including
Substitute Contracts and Upgrade Contracts, and any amendments, riders and
annexes thereto; provided that, from and after the date on which a Receivable
relating to a Contract is purchased or substituted by the Issuer, TFI or
Trendwest in accordance with Section 4.03 hereof, such Contract shall no longer
constitute a "Contract" for purposes of the Transaction Documents.
"Corporate Trust Office": The principal corporate trust office of the
Trustee located at 135 South LaSalle Street, Suite 1740, Chicago, Illinois
60603, Attention: Asset Backed
-4-
<PAGE> 10
Securities Trust Services Group -- TRI Funding 1996-1, or at such other address
as the Trustee may designate from time to time by notice to the Noteholders and
the Issuer, or the principal corporate trust office of any successor Trustee.
"Credits": The vacation credits financed by an Obligor pursuant to a
Contract.
"Custodian": Sage Systems, Inc., a Washington corporation, and its
permitted successors and assigns.
"Custodian Files": The meaning set forth in the Sale Agreement.
"Cut-Off Date": With respect to Contracts pledged to the Trustee on the
Closing Date, March 16, 1996, and with respect to any Substitute Contract or
Upgrade Contract, the date on which such Contract is pledged to the Trustee by
the Issuer.
"Default": Any occurrence or circumstance which with notice or the
lapse of time or both would become an Event of Default.
"Default Rate": For any Due Period, the sum of the Collateral Values as
of the Calculation Date occurring in such Due Period of all Contracts that
became Defaulted Contracts in such Due Period and remained Defaulted Contracts
as of such Calculation Date divided by the Aggregate Collateral Value on the
Calculation Date immediately preceding such Due Period.
"Defaulted Contract": A Contract shall become a Defaulted Contract at
the earliest of (i) the date on which the Servicer receives notice that the
related Obligor has (or, if a Contract has two Obligors, both Obligors have)
become the subject of bankruptcy proceedings, (ii) the Calculation Date on which
any portion of the related Receivable would (if such Receivable were owned by
Trendwest) be written off Trendwest's financial statements or books of account
or would otherwise be deemed uncollectible in the normal course of business (for
reasons other than disputes of amounts owed with respect to such Receivable),
(iii) the Calculation Date on which all or part of any Scheduled Payment with
respect to such Contract has not been received and remains unpaid for a period
of 180 or more days as of such Calculation Date or (iv) the date on which the
related Obligor has (or, if a Contract has two Obligors, both Obligors have)
given notice to the Servicer, or the Servicer otherwise has reason to believe,
that the related Receivable will not be paid (for reasons other than disputes of
amounts owed with respect to such Receivable).
"Delinquent Contract": As of any Calculation Date, a Contract (a) as to
which a Scheduled Payment was not received by or on behalf of the Issuer within
60 days of when such Scheduled Payment was due and remains unpaid as of such
Calculation Date and (b) is not a Defaulted Contract.
"Delinquency Level": For any Due Period, the sum of the Collateral
Values as of the Calculation Date occurring in such Due Period of all Delinquent
Contracts as of such
-5-
<PAGE> 11
Calculation Date, divided by the Aggregate Collateral Value on the Calculation
Date immediately preceding such Due Period.
"Delivery Date": The date on which a Note is issued in accordance with
this Indenture.
"Determination Date": The fifth day preceding each Payment Date or, if
such day is not a Business Day, the next succeeding Business Day.
"Distribution Account": The trust account created and maintained
pursuant to Section 12.02 hereof.
"Due Date": With respect to each Receivable, the date of the month on
which payment is due thereunder.
"Due Period": As to any Determination Date or Payment Date, as the case
may be, the period beginning on and including the first day and ending at the
end of the last day of the calendar month preceding the month in which such
Determination Date or Payment Date, as the case may be, occurs.
"Eligible Account": A segregated account, which may be an account
maintained with the Trustee, which is maintained with a depository institution
or trust company whose long term unsecured debt obligations are rated at least
A-1 by Fitch, (or, if not rated by Fitch, an equivalent rating from S&P or
Moody's).
"Eligible Investments": Any and all of the following:
(i) direct obligations of, and obligations fully guaranteed
by, the United States of America or any agency or instrumentality of
the United States of America the obligations of which are backed by the
full faith and credit of the United States of America;
(ii) (A) demand and time deposits in, certificates of deposit
of, banker's acceptances issued by or federal funds sold by any
depository institution or trust company (including the Trustee or its
agent acting in their respective commercial capacities) incorporated
under the laws of the United States of America or any State thereof and
subject to supervision and examination by federal and/or state
authorities, so long as at the time of such investment or contractual
commitment providing for such investment, such depository institution
or trust company has a short term unsecured debt rating of F-1+ (or its
equivalent) of Fitch, (or, if not rated by Fitch, an equivalent rating
from S&P or Moody's) and provided that each such investment has an
original maturity of no more than 180 days, and (B) any other demand or
time deposit or deposit which is fully insured by the Federal Deposit
Insurance Corporation;
-6-
<PAGE> 12
(iii) securities bearing interest or sold at a discount issued
by any corporation incorporated under the laws of the United States of
America or any State thereof which has a long term unsecured debt
rating in the highest available rating category of Fitch (or, if not
rated by Fitch, an equivalent rating from S&P or Moody's) at the time
of such investment;
(iv) commercial paper having, or demand notes constituting an
investment vehicle in commercial paper having, an original maturity of
less than 180 days and issued by an institution having a short term
unsecured debt rating in the highest available rating category of Fitch
(or, if not rated by Fitch, an equivalent rating from S&P or Moody's)
at the time of such investment (the issuer of any demand notes under
this paragraph (iv) must also be an institution that satisfies the
unsecured debt rating test specified in this paragraph (iv));
(v) a guaranteed investment contract issued by an insurance
company or other corporation having a long term unsecured debt rating
or a claims paying ability rated in the highest available rating
category of Fitch (or, if not rated by Fitch, an equivalent rating from
S&P or Moody's) at the time of such investment; and
(vi) money market funds having ratings in the highest or
second highest available rating category of Fitch (or, if not rated by
Fitch, an equivalent rating from S&P or Moody's) at the time of such
investment which invest only in other Eligible Investments; any such
money market funds which provide for demand withdrawals being
conclusively deemed to satisfy any maturity requirement for Eligible
Investments set forth in this Indenture.
Any Eligible Investments may be purchased by or through the Trustee or any of
its Affiliates.
"Event of Default": The meaning specified in Section 6.01 hereof.
"Final Due Date": With respect to each Receivable, the last Due Date
specified in the related Contract.
"Final Payment Date": The date on which the final principal payment on
the Notes becomes due and payable as therein or herein provided, whether at the
Stated Maturity or by acceleration or redemption.
"Fitch": Fitch Investors Service, L.P. and its successors in interest.
"Grant": To grant, bargain, sell, warrant, alienate, remise, release,
convey, assign, transfer, mortgage, pledge, create and grant a security interest
in and right of set-off against, deposit, set over and confirm. A Grant of the
Contracts, the Receivables or of any other instrument shall include all rights,
powers and options (but none of the obligations) of the Granting party
thereunder, including, without limitation, the immediate and continuing right to
claim, collect, receive and receipt for payments in respect of the Contracts and
the
-7-
<PAGE> 13
Receivables, or any other payment due thereunder, to give and receive notices
and other communications, to make waivers or other agreements, to exercise all
rights and options, to bring proceedings in the name of the Granting party or
otherwise, and generally to do and receive anything which the Granting party is
or may be entitled to do or receive thereunder or with respect thereto.
"Guaranty Amounts": Any and all amounts paid by a guarantor, if any,
indicated on the applicable Contract.
"Holder" or "Noteholder": The person in whose name a Note is registered
in the Note Register.
"Indenture" or "this Indenture": This instrument as originally executed
as from time to time supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
as so supplemented or amended. All references in this Indenture to designated
"Articles," "Sections," "Subsections" and other subdivisions are to the
designated Articles, Sections, Subsections and other subdivisions of this
Indenture as originally executed, or if amended or supplemented, as so amended
and supplemented. The words "herein," "hereof," "hereunder" and other words of
similar import, when not related to a specific subdivision of this Indenture,
refer to this Indenture as a whole and not to any particular Article, Section,
Subsection or other subdivision.
"Independent": When used with respect to any specified Person means
such a Person, who (1) is in fact independent of the Issuer, (2) does not have
any direct financial interest or any material indirect financial interest in the
Issuer or in any Affiliate of the Issuer, (3) is not connected with the Issuer
as an officer, employee, promoter, underwriter, Trustee, partner, director, a
person performing similar functions and (4) is not a brother, sister, spouse,
parent or child of any Person listed in clauses (2) and (3) above. Whenever it
is herein provided that any Independent Person's opinion or certificate shall be
furnished to the Trustee, such Person shall be appointed by a Issuer Order and
approved by the Trustee in the exercise of reasonable care, and such opinion or
certificate shall state that the signer has read this definition and that the
signer is Independent within the meaning hereof.
"Initial Aggregate Collateral Value": $77,779,368.
"Initial Payment Date": May 15, 1996, the first Payment Date following
the Closing Date.
"Institutional Investor": Any original purchaser of a Note, any holder
of a Note holding more than 5% of the aggregate principal amount of the Notes
Outstanding and any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any similar financial institution or entity,
regardless of legal form.
"Investor": Shall mean R & R Vista, an Oregon partnership, and its
permitted successors and assigns.
-8-
<PAGE> 14
"Investor Interest Distribution Amount": With respect to each Payment
Date, an amount equal to the lesser of (a) an amount equal to the product of (i)
14% per annum and (ii) the difference between (A) $2,333,381 and (B) the
aggregate amount distributed pursuant to Section 12.02(d)(viii) hereof on all
Payment Dates prior to such Payment Date or distributed to the Investors from
the reserves of the Issuer (solely out of funds that have been released to the
Issuer pursuant to Section 12.02(d)(xiv) hereof) and (b) the amount of cash
available after payment of all amounts required by clauses (i) through (vi) of
Section 12.02(d) hereof.
"Investor Principal Distribution Amount": With respect to each Payment
Date, (a) for any Payment Date prior to the Stated Maturity, an amount equal to
the lesser of (i) 3% of the sum of (A) the principal portion of the amounts
collected by or on behalf of the Issuer in the immediately preceding Due Period
attributable to (1) payments by or on behalf of each Obligor of amounts owed on
the related Receivable, (2) Residual Proceeds and Recoveries (without
duplication of amounts in clause (1)) and (3) payments of Purchase Price by TFI,
SPC, the Issuer or Trendwest (without duplication of amounts in clauses (1) or
(2)), and (B) the Collateral Value as of the related Calculation Date of any
Contract that became a Defaulted Contract in the immediately preceding Due
Period; and (ii) the amount of cash available after payment of all amounts
required by clauses (i) through (viii) of Section 12.02(d) hereof; (b) for any
Payment Date on which the Investor Principal Shortfall Amount is greater than
zero, the lesser of (i) the amount set forth in clause (a) above plus an amount
equal to the Investor Principal Shortfall Amount and (ii) the amount of cash
available after payment of all amounts required by clauses (i) through (viii) of
Section 12.02(d) hereof; and (c) on the Stated Maturity, an amount equal to the
lesser of (i) aggregate principal amount of the Investor's investment
outstanding as of such date and (ii) the amount of cash available after payment
of all amounts required by clauses (i) through (viii) of Section 12.02(d)
hereof.
"Investor Principal Shortfall Amount": With respect to any Payment
Date, an amount equal to the aggregate amount of distributions of the Investor
Principal Distribution Amount that were not made on any prior Payment Dates
(without duplication).
"Issuer": TRI Funding Company I, L.L.C., a Delaware limited liability
company, until a successor Person shall have become the Issuer pursuant to the
applicable provisions of this Indenture, and thereafter "Issuer" shall mean such
successor Person.
"Issuer Order" and "Issuer Request": A written order or request signed
in the name of the Issuer by the Chairman of the Board, President, a Vice
President, the Treasurer or Secretary of a member of the Issuer, and delivered
to the Trustee.
"Lien": Any mortgage, deed of trust, pledge, hypothecation, assignment,
participation or equity interest, deposit arrangement, encumbrance, charge, lien
(statutory or other), preferences priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing and the filing of any financing statement under the UCC (other than
any such
-9-
<PAGE> 15
financing statement filed for informational purposes only) or comparable law of
any jurisdiction to evidence any of the foregoing.
"Monthly Servicer's Report": The report prepared by the Servicer
pursuant to Section 4.01 of the Servicing Agreement.
"Moody's: Moody's Investors Service, Inc. and its successors in
interest.
"Note" or "Notes": The notes authenticated and delivered under this
Indenture.
"Noteholder" or "Holder": The Person in whose name a Note is registered
in the Note Register.
"Note Interest Rate": 7.42% per annum.
"Note Purchase Agreements": Each of the Note Purchase Agreements, dated
as of March 1, 1996, between the Issuer and the purchasers named therein.
"Note Register" and "Note Registrar": The respective meanings specified
in Section 3.04 hereof.
"Obligor": The borrower under each related Contract, including any
guarantor of such borrower, and their respective successors and assigns.
"Officer's Certificate": A certificate signed by the Chairman of the
Board, the President, a Vice President, the Treasurer, the Controller, an
Assistant Controller or the Secretary of the company (or, with respect to the
Issuer, the corporate member of the Issuer) on whose behalf the certificate is
delivered, and delivered to the Trustee, which certificate shall comply with the
applicable requirements of Section 13.12 hereof. Unless otherwise specified, any
reference in this Indenture to an Officer's Certificate shall be to an Officer's
Certificate of the corporate member of the Issuer on behalf of the Issuer.
"Opinion of Counsel": A written opinion of counsel who may, except as
otherwise expressly provided in this Indenture, be counsel for the Issuer and
who shall be reasonably satisfactory to the Trustee and which opinion shall
comply with the applicable requirements of Section 13.12 hereof.
"Outstanding": With respect to the Notes, as of any date of
determination, all Notes theretofore authenticated and delivered under this
Indenture except:
(i) Notes theretofore canceled by the Note Registrar or
delivered to the Note Registrar for cancellation; and
(ii) Notes in exchange for or in lieu of which other Notes
have been authenticated and delivered pursuant to this Indenture,
unless proof satisfactory to the Trustee is presented that any such
Notes are held by a bona fide purchaser;
-10-
<PAGE> 16
provided, however, that for purposes of determining whether the Holders of the
requisite principal amount of the Outstanding Notes have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Notes
owned by the Issuer or any other obligor upon such Notes, any Affiliate of the
Issuer or Trendwest shall be disregarded and deemed not to be Outstanding,
except that, in determining whether the Trustee shall be protected in relying
upon any such request, demand, authorization, direction, notice, consent, or
waiver, only such Notes which the Trustee knows to be so owned shall be so
disregarded.
"Overdue Payment": With respect to a Due Period and a Delinquent
Contract, all payments due in a prior Due Period that the Servicer receives from
or on behalf of an Obligor during the related Due Period on such Delinquent
Contract, including any Servicing Charges.
"Paying Agent": The Trustee or any other Person that meets the
eligibility standards for the Trustee specified in Section 7.08 hereof and is
authorized by the Issuer pursuant to Section 11.15(o) hereof to pay the
principal of, or interest on, any Notes on behalf of the Issuer.
"Payment Date": The fifteenth day of each calendar month (or if such
day is not a Business Day, the next succeeding Business Day) commencing on the
Initial Payment Date.
"Permitted Institutional Investor" means (a) any original purchaser of
a Note and (b) any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company, any insurance
company, any broker or dealer, or any other similar financial institution or
entity, regardless of legal form.
"Person": Any individual, corporation, limited liability company,
partnership, association, joint-stock company, trust (including any beneficiary
thereof), unincorporated organization or government or any agency or political
subdivision thereof.
"Placement Agents": Each of SPP Hambro & Co., LLC and NBD Bank.
"Principal Distribution Amount": With respect to each Payment Date, (a)
for any Payment Date prior to the Stated Maturity, an amount equal to 90% of the
sum (without duplication) of (i) the principal portion of the amounts collected
by or on behalf of the Issuer in the immediately preceding Due Period
attributable to (A) payments by or on behalf of each Obligor of amounts owed on
the related Receivable, (B) Residual Proceeds and Recoveries and (C) payments of
Purchase Price by TFI, SPC, the Issuer or Trendwest, and (ii) the Collateral
Value as of the related Calculation Date of any Contract that became a Defaulted
Contract in the immediately preceding Due Period; (b) for any Payment Date on
which the Principal Shortfall Amount is greater than zero, the amount set forth
in clause (a) above plus an amount equal to the Principal Shortfall Amount and
(c) on the Stated Maturity, an amount equal to the aggregate principal amount of
Notes Outstanding as of such date.
-11-
<PAGE> 1
CHAPMAN AND CUTLER DRAFT
OF APRIL 17, 1996
SERVICING AGREEMENT
among
TRI FUNDING COMPANY I, L.L.C.
("Issuer")
and
TRENDWEST RESORTS, INC.
("Servicer")
and
SAGE SYSTEMS, INC.
("Subservicer")
and
LASALLE NATIONAL BANK, as Trustee
("Trustee")
Dated as of March 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS.................................... 1
Section 1.01. Defined Terms............................... 1
ARTICLE 2 SERVICER REPRESENTATIONS, WARRANTIES AND
COVENANTS...................................... 4
Section 2.01. Representations and Warranties.............. 4
Section 2.02. Covenants................................... 6
ARTICLE 3 ADMINISTRATION AND SERVICING OF CONTRACTS...... 6
Section 3.01. Responsibilities of Servicer................ 6
Section 3.02. Standard of Care............................ 9
Section 3.03. Clearing Account, ACH Payments and Servicer
Remittances................................. 9
Section 3.04. Property Management......................... 10
Section 3.05. Financing Statements........................ 10
Section 3.06. [Reserved.]................................. 10
Section 3.07. [Reserved.]................................. 10
Section 3.08. No Offset................................... 10
Section 3.09. Servicing Compensation...................... 11
Section 3.10. Substitution or Purchase of Contracts and
Receivables................................. 11
ARTICLE 4 ACCOUNTINGS, STATEMENTS AND REPORTS............ 12
Section 4.01. Monthly Servicer's Reports.................. 12
Section 4.02. Financial Statements; Certification as to
Compliance; Notice of Default............... 13
Section 4.03. Independent Accountants' Reports............ 14
Section 4.04. Access to Certain Documentation and
Information................................. 15
Section 4.05. Trustee to Cooperate........................ 17
Section 4.06. Oversight of Servicing...................... 17
ARTICLE 5 THE SERVICER, THE SUBSERVICER AND THE ISSUER... 18
Section 5.01. Servicer and Subservicer Indemnification.... 18
Section 5.02. Corporate Existence; Reorganizations........ 19
Section 5.03. Limitation on Liability of the Servicer, the
Subservicer and Others...................... 19
Section 5.04. The Servicer and Subservicer Not to Resign.. 20
Section 5.05. Issuer Indemnification...................... 20
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 6 SERVICING TERMINATION.......................... 21
Section 6.01. Servicer Events of Default.................. 21
Section 6.02. Appointment of Successor Servicer........... 23
Section 6.03. Notification to Noteholders................. 24
Section 6.04. Waiver of Past Defaults..................... 24
Section 6.05. Effects of Termination of Servicer.......... 24
Section 6.06. No Effect on Other Parties.................. 25
ARTICLE 7 THE SUBSERVICER................................ 25
Section 7.01. Representations and Warranties.............. 25
Section 7.02. Subservicer Events of Default............... 26
Section 7.03. Appointment of Successor Subservicer........ 28
Section 7.04. Notification to Noteholders................. 28
Section 7.05. Waiver of Past Defaults..................... 28
Section 7.06. Effects of Termination of Subservicer....... 28
ARTICLE 8 MISCELLANEOUS PROVISIONS....................... 29
Section 8.01. Termination of the Servicing Agreement...... 29
Section 8.02. Amendments.................................. 29
Section 8.03. Governing Law............................... 30
Section 8.04. Notices, etc., to Trustee, Issuer, Servicer
and Subservicer............................. 30
Section 8.05. Notices and Other Documents to Noteholders;
Waiver...................................... 31
Section 8.06. Severability of Provisions.................. 31
Section 8.07. Binding Effect.............................. 31
Section 8.08. Article Headings and Captions............... 32
Section 8.09. Legal Holidays.............................. 32
Section 8.10. Assignment for Security for the Notes....... 32
Section 8.11. No Servicing Assignment..................... 32
Section 8.12. Counterparts................................ 32
Signatures....................................................... 33
Exhibit A -- Form of Monthly Servicer's Report
Exhibit B -- Form of Report of Independent Accountants
</TABLE>
-ii-
<PAGE> 4
SERVICING AGREEMENT
THIS SERVICING AGREEMENT, dated as of March 1, 1996 (the "Agreement"), by
and among TRI FUNDING COMPANY I, L.L.C., a Delaware limited liability company
(herein, together with its permitted successors and assigns, the "Issuer"),
TRENDWEST RESORTS, INC., an Oregon corporation, as servicer hereunder (herein,
together with its permitted successors and assigns, the "Servicer"), SAGE
SYSTEMS, INC., a Washington corporation, as subservicer hereunder (herein,
together with its permitted successors and assigns, the "Subservicer") and
LASALLE NATIONAL BANK, as trustee (herein, together with its permitted
successors and assigns, the "Trustee") under the Indenture (defined below).
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of March 1, 1996 (as
amended and supplemented from time to time, the "Indenture"), with the Trustee
and the Servicer, pursuant to which the Issuer intends to issue its 7.42%
Receivables-Backed Notes, Series 1996-1 (collectively, the "Notes").
The Issuer, Trendwest Resorts, Inc. (not as Servicer, but acting on its
own behalf, "Trendwest"), Trendwest Funding I, Inc., a Delaware corporation
("TFI"), and TWH Funding I, Inc., a Delaware corporation ("SPC"), have entered
into a Purchase and Sale Agreement, dated as of March 1, 1996 (as amended and
supplemented from time to time, the "Sale Agreement"), providing for, among
other things, the sale by SPC and TFI to the Issuer of the Purchased Assets, as
defined in the Sale Agreement. Under the terms and conditions set forth in the
Indenture, the Issuer is and will be pledging such Purchased Assets to the
Trustee as security for the Notes. As a precondition to the effectiveness of the
Sale Agreement, the Sale Agreement requires that the Servicer, the Subservicer,
the Issuer and the Trustee enter into this Agreement to provide for the
servicing of the Purchased Assets.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Sale Agreement, and the Servicer and the
Subservicer agree that all covenants and agreements made by the Servicer and the
Subservicer herein with respect to the Purchased Assets shall also be for the
benefit and security of the Trustee and all Holders from time to time of the
Notes. For its services under this Agreement, the Servicer will receive a
Servicer Fee as provided herein and in the Indenture.
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. Except as otherwise specified or as the context
may otherwise require, the following terms have the respective meanings set
forth below for all purposes of this Agreement, and the definitions of such
terms are equally applicable both to the singular and plural forms of such terms
and to the masculine, feminine and neuter
<PAGE> 5
genders of such terms. Capitalized terms used but not otherwise defined herein
shall have the respective meanings assigned to such terms in the Indenture.
"Clearing Account" shall mean the account established by the Subservicer
at the Clearing Account Bank, into which account collections with respect to the
Contracts will be deposited by the Subservicer.
"Clearing Account Bank" shall mean First Interstate Bank of Washington (or
an affiliate thereof), and its successors and assigns.
"Contract Files" shall have the meaning specified in the Sale Agreement.
"Custodian Agreement" shall mean the Custodian Agreement, dated as of
March 1, 1996, among Sage Systems, Inc., as Custodian, the Trustee, the Issuer
and Trendwest, as amended and supplemented from time to time.
"Custodian Files" shall have the meaning specified in the Sale
Agreement.
"Independent Accountants" shall mean Molatore, Peugh, McDaniel, Scroggin &
Co. or another firm of public accountants of recognized standing; provided, that
such firm is independent with respect to the Servicer within the meaning of the
Securities Act of 1933, as amended.
"Institutional Investor" shall have the meaning specified in the
Indenture.
"Issuer" shall mean TRI Funding Company I, L.L.C., a Delaware limited
liability company and its permitted successors and assigns.
"Liquidated Receivable" shall mean a Receivable that has been liquidated
pursuant to Section 3.01(b) hereof.
"Monthly Servicer's Report" shall mean the report prepared by the Servicer
pursuant to Section 4.01 hereof.
"Officer's Certificate" shall mean, for any Person, a certificate signed
by the President, any Vice President, Treasurer or Secretary of such Person and,
in the case of the Issuer, any authorized representative of the Issuer.
"Opinion of Counsel" shall mean a written opinion of counsel in a form
that is, and from counsel who is, reasonably acceptable to the person requesting
such opinion.
"Projected Income" shall mean, with respect to each Due Period, the amount
set forth under the line item "Amount Billed" on the Monthly Servicer's Report.
"Purchased Assets" shall have the meaning specified in the Sale
Agreement.
-2-
<PAGE> 6
"Receivables Purchase Agreement" shall mean the Receivables Purchase
Agreement, dated as of the date hereof, among Trendwest, TW Holdings, Inc. and
TFI as the same may be amended or modified from time to time, together with any
annexes, appendices, exhibits or schedules thereto and including the Assignment
executed and delivered in connection therewith.
"Remittance Date" shall mean the Business Day immediately preceding each
Payment Date.
"Reported Company" shall mean each of the Issuer, the Subservicer,
WorldMark, Trendwest and its subsidiaries, provided, however, if Trendwest is no
longer acting as Servicer or Sage is no longer acting as Subservicer, then
"Reported Company" shall also mean any successor Servicer or successor
Subservicer, as the case may be, appointed pursuant to this Agreement.
"Reported Company's Financial Statements" shall include each Reported
Company's audited consolidated balance sheet, income statement, statement of
cash flows, auditors opinion letter regarding audited financial statements and
all notes to the audited financial statements; Trendwest's and WorldMark's
financial statements shall be audited, but, with respect to any other Reported
Company, if such information is not currently being audited, then such
information may be unaudited.
"Sage" shall mean Sage Systems, Inc., a Washington corporation and its
successors in interest.
"Sale Agreement" shall mean the Purchase and Sale Agreement, together with
any annexes, appendices, exhibits or schedules attached thereto, by and among
TFI, SPC, Trendwest and the Issuer dated as of the date hereof, and including
the Assignment executed and delivered in connection therewith.
"Servicer" shall initially mean Trendwest Resorts, Inc. until a successor
Person shall have become the Servicer pursuant to the applicable provisions of
this Agreement, and thereafter "Servicer" shall mean such successor Person.
"Servicer Default" shall mean any occurrence or circumstance which with
notice or the lapse of time or both would be a Servicer Event of Default under
this Agreement.
"Servicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 6.01 hereof.
"Servicer Termination Notice" means the notice described in Section
6.01 hereof.
"Servicing Officer" shall mean those officers of the Servicer involved in,
or responsible for, the administration and servicing of the Purchased Assets, as
identified on the list of Servicing Officers furnished by the Servicer to the
Trustee and the Noteholders from time to time.
-3-
<PAGE> 7
"SPC" shall mean TWH Funding I, Inc., a Delaware corporation, and its
permitted successors and assigns.
"Subservicer" shall initially mean Sage until a successor Person shall
have become the Subservicer pursuant to the applicable provisions of this
Agreement, and thereafter "Subservicer" shall mean such successor Person.
"Subservicer Default" shall mean each of the occurrences or circumstances
which with notice or the lapse of time or both would be a Subservicer Event of
Default under this Agreement.
"Subservicer Event of Default" shall mean each of the occurrences or
circumstances enumerated in Section 7.02 hereof.
"Substitution Criterion" shall have the meaning specified in the Sale
Agreement.
"Substitute Receivable" shall have the meaning specified in the Sale
Agreement.
"TFI" shall mean Trendwest Funding I, Inc., a Delaware corporation, and
its permitted successors and assigns.
"Trustee" shall initially mean LaSalle National Bank, until a successor
Person shall have become the Trustee pursuant to the applicable provisions of
the Indenture, and thereafter "Trustee" shall mean such successor Person.
"Upgrade" shall have the meaning specified in the Indenture.
"Upgrade Contract" shall have the meaning specified in the Indenture.
ARTICLE 2
SERVICER REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 2.01. Representations and Warranties. The Servicer makes the
following representations and warranties to the Trustee and for the benefit
of the Noteholders which shall survive the Closing Date:
(a) Organization and Good Standing. The Servicer has been duly
incorporated and is validly existing in good standing as a corporation
under the laws of the State of Oregon, with requisite corporate power and
authority to own its properties, perform its obligations under this
Agreement and the Indenture and to transact the business in which it is
now engaged or in which it proposes to engage; the Servicer is duly
qualified to do business and is in good standing in each State in which
the nature of its business requires it to be so qualified, except where
failure to so qualify would not have a material adverse effect on the
ability of the Servicer to perform its obligations under this Agreement
and the Indenture.
-4-
<PAGE> 8
(b) Authorization and Binding Obligation. Each of this Agreement and
the Indenture has been duly authorized, executed and delivered by the
Servicer and constitutes the valid and legally binding obligation of the
Servicer enforceable against the Servicer in accordance with its terms,
subject as to enforcement to any bankruptcy, insolvency, reorganization
and other similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity regardless
of whether enforcement is sought in a court of equity or law.
(c) No Violation. The entering into of this Agreement and the
Indenture and the performance by the Servicer of its obligations under
this Agreement and the Indenture and the consummation of the transactions
herein and therein contemplated will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any of the property or assets of the Servicer pursuant to
the terms of any material indenture, mortgage, deed of trust or other
agreement or instrument to which it is a party or by which it is bound or
to which any of its property or assets is subject, nor will such action
result in any violation of the provisions of its Articles of Incorporation
or By-laws, or any statute or any order, rule or regulation of any court
or any regulatory authority or other governmental agency or body having
jurisdiction over it or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any court,
or any such regulatory authority or other governmental agency or body is
required for the Servicer to enter into this Agreement and the Indenture.
(d) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of the Servicer, threatened against or
affecting the Servicer or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal,
including but not limited to any such proceeding or investigation with
respect to any environmental or other liability resulting from the
ownership or use of any of the Credits, which, individually or in the
aggregate, involve the possibility of materially and adversely affecting
the properties, business, prospects, profits or condition (financial or
otherwise) of the Servicer and its subsidiaries, or the ability of the
Servicer to perform its obligations under this Agreement or the Indenture.
The Servicer is not in default with respect to any order of any court,
governmental authority or agency or arbitration board or tribunal.
(e) Approvals. The Servicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii)
has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property or
to the conduct of its business, and (iii) is not in violation in any
material respect of any term of any agreement, charter instrument, bylaw
or instrument to which it is a party or by which it may be bound, which
violation or failure to obtain materially adversely affect the business or
condition (financial or otherwise) of the Servicer and its subsidiaries.
-5-
<PAGE> 9
(f) Investment Company. The Servicer is not an investment
company which is required to register under the Investment Company Act
of 1940, as amended.
(g) Fidelity Bond. The Servicer has insurance coverage for employee
dishonesty with respect to pension funds in an amount equal to $2,000,000
per occurrence and for employee dishonesty with respect to other funds in
an amount equal to $500,000 per occurrence.
Section 2.02. Covenants. (a) The Servicer covenants as to the
Purchased Assets:
(i) The Servicer shall not release or assign any Lien in favor of
the Trustee on any Credits related to any Contract in whole or in part,
except as permitted herein or in the Indenture.
(ii) The Servicer will in all material respects duly fulfill all
obligations on the Servicer's part to be fulfilled under or in connection
with the Purchased Assets. The Servicer will not amend, rescind, cancel or
modify any Contract or term or provision thereof, except as permitted
herein or in the Indenture, and the Servicer will not do anything that
would impair the rights of the Noteholders in the Purchased Assets, except
as contemplated herein or in the Indenture; provided that, without
limiting the foregoing, the Servicer may once per Contract over the
lifetime of such Contract allow the Obligor of such Contract to skip one
Scheduled Payment and add one month to the term of the related Contract;
provided, further, that such extension will not extend the date of the
last payment of any Contract one month beyond the Stated Maturity of the
Notes.
(iii) As more specifically set forth below, in performing its
servicing duties hereunder, the Servicer shall collect all payments
required to be made by the Obligors under the Contracts and enforce all
material rights of the Issuer under the Contracts. The Servicer shall not
assign, sell, pledge or exchange or in any way encumber or otherwise
dispose of the Credits, except as permitted hereunder or in the Indenture.
(b) The Servicer will deliver each of the accountings, statements
and reports described in Article 4 hereof to each party as set forth
therein.
(c) The Servicer shall maintain insurance coverage for employee
dishonesty with respect to pension funds in an amount greater than or
equal to $2,000,000 per occurrence and for employee dishonesty with
respect to other funds in an amount greater than or equal to $500,000 per
occurrence.
ARTICLE 3
ADMINISTRATION AND SERVICING OF CONTRACTS
Section 3.01. Responsibilities of Servicer. (a) The Servicer, for the
benefit of the Noteholders, shall be responsible for, and shall, in accordance
with its customary practices,
-6-
<PAGE> 10
pursue the managing, servicing, administering, enforcing and making of
collections on the Contracts, the Credits, the enforcement of the Trustee's
security interest in the Receivables and the Credits granted pursuant to the
Indenture, and, if applicable, the resale of the Credits, each in accordance
with applicable law and the standards and procedures set forth in this Agreement
and any related provisions of the Indenture, the Sale Agreement and the
Receivables Purchase Agreement. The Servicer's responsibilities shall include
collecting and posting of all payments, responding to inquiries of Obligors,
investigating delinquencies, accounting for collections and furnishing monthly
and annual statements to the Trustee and the Noteholders with respect to
payments and using its best efforts to maintain the perfected security interest
of the Trustee in the Trust Estate (except with respect to the Credits). Subject
to the terms and conditions of this Agreement, the Servicer (at its expense),
acting alone or through a subservicer, including the Subservicer, shall have
full power and authority, acting at its sole discretion, to do any and all
things in connection with such managing, servicing, administration, enforcement,
collection and such resale of the Credits that it may deem necessary or
desirable and in the best interests of the Noteholders, including the prudent
delegation of such responsibilities. Without limiting the generality of the
foregoing, the Servicer, in its own name or in the name of the Subservicer,
shall, and is hereby authorized and empowered by the Trustee, subject to Section
3.02 hereof, to execute and deliver (on behalf of itself, the Noteholders, the
Trustee or any of them) any and all instruments of satisfaction or cancellation,
or of partial or full release or discharge, and all other comparable
instruments, with respect to the Contracts, the Custodian Files and the Contract
Files. Subject to the terms and conditions of this Agreement, the Servicer,
acting alone or through the Subservicer, also may, in its sole discretion, waive
any late payment charge or penalty, or any other fees that may be collected in
the ordinary course of servicing any Contract. Notwithstanding the foregoing,
neither the Servicer, nor the Subservicer, shall, except pursuant to an Upgrade
or a judicial order from a court of competent jurisdiction, or as otherwise
expressly provided in this Agreement, release or waive the right to collect the
Scheduled Payments or any unpaid balance on any Contract. The Trustee shall, at
the expense of the Servicer, furnish the Servicer, or at the request of the
Servicer, the Subservicer, with any powers of attorney and other documents
necessary or appropriate to enable the Servicer or the Subservicer to carry out
their servicing and administrative duties hereunder, and the Trustee shall not
be responsible for the Servicer's or the Subservicer's application thereof.
Notwithstanding the appointment by the Servicer of the Subservicer or any
delegation of its responsibilities hereunder, the Servicer shall remain
primarily liable for the full performance of its obligations hereunder;
provided, however, that if the Servicer requests from the Holders the removal of
the Subservicer after the occurrence of a Subservicer Event of Default, or any
act or omission that with the passage of time would be a Subservicer Event of
Default, and the Holders of 66-2/3% in principal amount of the Notes Outstanding
do not consent to such request, the Servicer shall no longer be liable for any
subsequent acts of the Subservicer except any acts taken by Sage at the
direction of the Servicer.
(b) The Servicer shall conduct any Contract management, servicing,
administration, collection or enforcement actions in the following manner:
-7-
<PAGE> 11
(i) The Servicer, as agent for and on behalf of the Issuer, with
respect to any Defaulted Contract shall follow such practices and
procedures as are normal and consistent with the Servicer's standards and
procedures relating to its own contracts, receivables and vacation credits
that are similar to the Contracts, Receivables and the Credits, including
without limitation, the taking of appropriate actions to foreclose or
otherwise liquidate any such Defaulted Contract, together with the related
Credits, to collect any Guaranty Amounts, and to enforce the Issuer's
rights in or under the Sale Agreement and the Receivables Purchase
Agreement. The Servicer shall continue its customary practice of applying
payments on Defaulted Contracts and Delinquent Contracts first to
delinquent interest, then to interest and then to principal. All
Recoveries or Residual Proceeds in respect of any such Receivable and the
related Credits received by the Servicer or the Subservicer shall be
deposited in the Clearing Account pursuant to Section 3.03(a);
(ii) The Servicer may sue to enforce or collect upon Contracts as
agent for the Trustee. If the Servicer elects to commence a legal
proceeding to enforce a Contract, the act of commencement shall be deemed
to be an automatic assignment of the Contract to the Servicer for purposes
of collection only. If, however, in any enforcement suit or legal
proceeding it is held that the Servicer may not enforce a Contract on the
ground that it is not a real party in interest or a holder entitled to
enforce the Contract, then the Trustee shall, at the Servicer's request
and expense, take such steps as the Servicer deems necessary and instructs
the Trustee in writing to take to enforce the Contract, including bringing
suit in its name or the name of the Issuer or the names of the
Noteholders, and the Trustee shall be indemnified by the Servicer for any
such action taken;
(iii) The Servicer shall exercise any rights of recourse against third
parties that exist with respect to any Contract in accordance with the
Servicer's usual practice and applicable law. In exercising recourse
rights, the Servicer is authorized on the Trustee's behalf to reassign the
Contract to the person against whom recourse exists to the extent
necessary, and at the price set forth in the document creating the
recourse. The Servicer will not reduce or diminish such recourse rights,
except to the extent that it exercises such right;
(iv) The Servicer may not accept Substitute Contracts that do not
comply with Section 3.10 hereof, Sections 3.03 and 3.04 of the Receivables
Purchase Agreement, Sections 3.03 and 3.04 of the Sale
Agreement and Section 4.03 of the Indenture;
(v) The Servicer may waive, modify or vary any terms of any Contract
or consent to the postponement of strict compliance with any such term if
in the Servicer's reasonable and prudent determination such waiver,
modification or postponement is not materially adverse to the Noteholders;
provided, however, that except as otherwise expressly permitted with
respect to an Upgrade, (A) the Servicer shall not forgive any payment, and
(B) the Servicer shall not permit any modification, waivers, variation or
postponements with respect to any Contract that would decrease the
Scheduled Payment, defer the payment of any principal or interest or any
-8-
<PAGE> 12
Scheduled Payment, reduce the Aggregate Collateral Value relating to the
Notes (except in connection with actual payments attributable to such
Aggregate Collateral Value), or prevent the complete amortization of the
Aggregate Collateral Value relating to the Notes from occurring by the
Calculation Date preceding the Stated Maturity. The Monthly Servicer's
Report shall indicate any modification of any Scheduled Payment pursuant
to Section 2.02(a)(ii) hereof; and
(vi) Notwithstanding any provision to the contrary contained in this
Agreement, the Servicer or the Subservicer shall exercise any right under
a Contract to accelerate the unpaid Scheduled Payments, due or to become
due thereunder in such a manner as to maximize the net proceeds available
to the Issuer; provided, however, that the Servicer will not accelerate
any Scheduled Payment unless permitted to do so by the terms of the
Contract and under applicable law.
Section 3.02. Standard of Care. In managing, administering, servicing,
enforcing and making collections on the Contracts and the Credits pursuant to
this Agreement, each of the Servicer and the Subservicer will provide such
services in a manner consistent with past practice and applicable law and will
not change such practice in any way that would cause an adverse material change
in such practice. In any event, each of the Servicer and the Subservicer
warrants that in providing such services it will exercise that degree of skill
and care consistent with that which other servicers in the industry customarily
exercise with respect to similar contracts and vacation credits owned or
serviced by them. Each of the Servicer and the Subservicer shall punctually
perform all of its obligations and agreements under this Agreement and shall
comply with all applicable federal and state laws and regulations, shall
maintain all state and federal licenses and franchises necessary for it to
perform its servicing responsibilities hereunder, and shall not materially
impair the rights of the Noteholders in any Contracts or payments thereunder.
Section 3.03. Clearing Account, ACH Payments and Servicer Remittances. (a)
The Servicer has previously instructed (or, with respect to Substitute
Contracts, will have instructed) each Obligor to remit his or her payments to
the Subservicer. The Subservicer shall deposit all payments for principal and
interest on the Receivables that it receives into an account (the "Clearing
Account") maintained at the Clearing Account Bank in the name of, and in the
sole control of, the Servicer. On each Business Day, the Subservicer shall, or
shall cause the Clearing Account Bank to, transfer all amounts in the Clearing
Account collected relating to the Contracts and the Receivables to the
Collection Account, which shall be an Eligible Account at the Clearing Account
Bank in the name of the Trustee on behalf of the Noteholders. The Trustee, based
solely on information set forth in the Monthly Servicer's Report, shall cause
the amounts in the Collection Account to be deposited in the Distribution
Account on the Remittance Date in an amount necessary to make the distributions
set forth in Section 12.02(d) of the Indenture on the related Payment Date.
(b) Except as otherwise provided in this Agreement, the Servicer, as agent
of the Issuer, shall remit or cause to be remitted to the Subservicer for
deposit in the Clearing Account by 4:00 p.m., Seattle time, on each Business Day
the amounts described below that
-9-
<PAGE> 13
have been received by the Servicer through 4:00 p.m., Seattle time, on the
preceding Business Day:
(i) all payments made under the Contracts relating to the
Receivables due after the Cut-Off Date, including prepayments but
excluding taxes, received directly by the Servicer;
(ii) all Residual Proceeds and Recoveries;
(iii) the Purchase Price of any Contract purchased by the
Servicer or the Issuer, to the extent received by the Servicer; and
(iv) all Guaranty Amounts.
The Servicer shall hold in trust for the benefit of the Noteholders any
payment it receives relating to items (i) through (iv) above until such time as
the Servicer transfers such payment to the Subservicer. The Subservicer shall
hold in trust for the benefit of the Holders of the Notes any payment it
receives relating to items (i) through (iv) above until such time as the
Subservicer transfers any such payment to the Clearing Account Bank for deposit
in the Clearing Account. Any such amounts held in the Clearing Account shall be
held in trust for the benefit of the Noteholders.
Section 3.04. Property Management. Trendwest will continue to manage the
Club in accordance with the management agreement between Trendwest and WorldMark
in existence as of the date hereof, as the same may be amended from time to time
on account of (i) a change in such agreement approved by a majority of the
members of WorldMark or (ii) a change in the agreement made in order to keep
Trendwest or WorldMark in compliance with federal, state or local laws, rules
and regulations, or (iii) as such agreement may be amended from time to time
with the written consent of the Holders of Notes representing 66-2/3% in
principal amount of the Notes Outstanding.
Section 3.05. Financing Statements. (a) The Servicer will make all UCC
filings and recordings as may be required pursuant to the terms of the
Indenture. The Servicer shall, in accordance with its customary servicing
procedures and at its own expense, be responsible for such steps as are
necessary to maintain perfection of such security interests. The Trustee hereby
authorizes the Servicer to re-perfect or to cause the re-perfection of such
security interest on its behalf as Trustee, as necessary.
(b) Within thirty (30) days from the date upon which the financing
statements described on Schedule I hereto appear in the records of the relevant
offices, the Servicer shall cause searches to be conducted in such offices and
promptly deliver the results of such searches to the counsel of the initial
Noteholders.
Section 3.06. [Reserved.]
Section 3.07. [Reserved.]
-10-
<PAGE> 14
Section 3.08. No Offset. Prior to the termination of this Agreement, the
obligations of the Servicer or the Subservicer under this Agreement shall not be
subject to any defense, counterclaim or right of offset which the Servicer or
the Subservicer have or may have against the Issuer, the Trustee or any
Noteholder whether in respect of this Agreement, the Indenture, the Notes, the
Sale Agreement, any Contract, Receivable, Credit or otherwise.
Section 3.09. Servicing Compensation. As compensation for the performance of
its obligations under this Agreement, the Servicer shall be entitled to receive
the Servicer Fee. The Servicer Fee shall be paid monthly, commencing on the
Initial Payment Date and terminating on the first to occur of (i) the receipt of
the last Scheduled Payment and related Residual Proceeds with respect to the
last remaining Contract, (ii) the receipt of Recoveries with respect to the last
remaining Contract, or (iii) the date on which the Issuer, Trendwest or TFI
purchases the last remaining Contract or Receivable, as the case may be. The
Servicer Fee shall be paid by the Issuer to the Servicer at the times and in the
priority as set forth in the Indenture. The Servicer shall pay all expenses
incurred by it in connection with its servicing activities hereunder, including,
without limitation, payment of the fees and disbursements of the Independent
Accountants, payment of expenses incurred in connection with distributions and
reports to the Trustee and the Noteholders and shall not be entitled to
reimbursement for such expenses; provided, however, that the Servicer will be
entitled to prompt reimbursement from the Issuer for reasonable costs and
expenses incurred by the Servicer (including reasonable attorney's fees and
out-of-pocket expenses) in connection with the realization, attempted
realization or enforcement of rights and remedies upon Defaulted Contracts, from
amounts received as Recoveries from any Defaulted Contracts. The Servicer shall
pay the fees and expenses of the Subservicer and shall not be entitled to
reimbursement therefor.
Section 3.10. Substitution or Purchase of Contracts and Receivables. (a)
Except with respect to an Upgrade, the Servicer shall not allow termination of a
Contract prior to the scheduled expiration date unless the Obligor prepays the
entire Contract in full or unless the Issuer has (i) pledged to the Trustee a
Substitute Receivable and the Issuer's interest in the related Credits under the
related Substitute Contract, and delivered to the Trustee the original executed
counterpart of such Substitute Contract or (ii) purchased such Receivable and
the Issuer's interest in the related Credits from the Trustee by remittance of
the Purchase Price to the Subservicer for deposit in the Clearing Account in
accordance with Section 3.03(a) hereof; provided, further, that purchases and
substitutions of Receivables pursuant to this subparagraph (a) shall comply with
the requirements of Section 4.03 of the Indenture and the criteria set forth in
Section 3.04 of the Sale Agreement and Section 3.04 of the Receivables Purchase
Agreement.
(b) The Servicer shall permit the Issuer to (i) purchase the Receivable
related to any Defaulted Contract or Delinquent Contract by remittance by the
Issuer to the Subservicer for deposit in the Clearing Account in accordance with
Section 3.03(a) hereof or (ii) substitute for the Receivable related to any
Defaulted Contract or Delinquent Contract a Substitute Receivable and the
Issuer's interest in the Credits under the related Substitute Contract, upon the
delivery to the Trustee of the original executed counterpart of the Substitute
Contract; provided that, purchases and substitutions of Receivables pursuant to
-11-
<PAGE> 15
this subparagraph (b) shall comply with the requirements of Section 4.03 of the
Indenture and the criteria set forth in Section 3.04 of the Sale Agreement and
Section 3.04 of the Receivables Purchase Agreement.
(c) Notwithstanding any other provision contained in this Agreement, the
Servicer shall not, with respect to a Defaulted Contract, negotiate or enter
into a new contract with the Obligor relating to the Credits or the Obligor's
obligations under such Defaulted Contract unless the Issuer has repurchased or
made a substitution for the Receivable related to such Defaulted Contract in the
manner set forth in subsection (b) hereof.
(d) In the event that Trendwest is required, as a result of the breach by
it of certain representations or warranties, to repurchase or substitute a
Contract pursuant to Section 3.03 of the Sale Agreement and Section 3.03 the
Receivables Purchase Agreement, the Servicer shall permit such repurchase or
substitution in accordance with the terms of Sections 3.03 and 3.04 thereof.
(e) On any Determination Date, if after giving effect to all distributions
to be made on the related Payment Date, the Reserve Account balance will be
equal to or greater than the Reserve Account Required Balance, Trendwest may, at
its option, purchase, in its own right and not as Servicer hereunder, the
Credits relating to a Defaulted Contract at a price equal to 25% of (i) the
initial principal balance of the related Contract with respect to Contracts
which have not been "upgraded," or (ii) the sum of the initial principal balance
of the original Contract and the increase in principal balance due to Upgrades
with respect to Contracts that have been "upgraded." On such Determination Date,
the proceeds of such sale shall be remitted by Trendwest to the Subservicer for
immediate deposit into the Clearing Account.
(f) Prior to the substitution of any Contract hereunder, the Subservicer
shall review its records and determine that there are no liens or other
interests in such Substitute Contract, the related Substitute Receivable and
related Credits other than that of Trendwest or TFI, as applicable. If there are
any such other interests in such Substitute Contract, such Contract shall not
become a substitute Contract until all such interests have been terminated.
ARTICLE 4
ACCOUNTINGS, STATEMENTS AND REPORTS
Section 4.01. Monthly Servicer's Reports. No later than 1:00 p.m., Chicago
time, on each Determination Date, the Servicer shall deliver to the Issuer, the
Placement Agents, the Trustee and each Noteholder the Monthly Servicer's Report
in the form attached as Exhibit A with respect to the activity in the
immediately preceding Due Period. In the course of preparing the Monthly
Servicer's Report, the Servicer shall seek direction from the Issuer as to
remittance of the funds to be paid pursuant to Section 12.02(d)(xiv) of the
Indenture. Contracts and Receivables which have been substituted for or
purchased by Trendwest or the Issuer shall be identified by the related Obligor
number. On each Determination Date, the Subservicer shall deliver to the
Trustee, in the form of a computer
-12-
<PAGE> 16
disk or tape or via electronic transmission in a format acceptable to the
Trustee, containing all the information in the Subservicer's electronic files
regarding each of the Receivables as well as any additional information
reasonably requested by the Trustee prior to the related Payment Date. The
Monthly Servicer's Report prepared for each Due Period for June, September,
December and March shall also include a summary of the following information as
of the end of such Due Period: the total number of Credits, whether sold or
unsold; and the number of developed properties of the Club; the name of each
such developed property and the total number of Credits allocated to each
developed property.
Section 4.02. Financial Statements; Certification as to Compliance; Notice
of Default. (a) The Servicer (or the successor Servicer if the initial Servicer
is no longer the Servicer) will deliver, or cause to be delivered, to the
Trustee, the Placement Agents and each Holder (and, upon the request of any
Noteholder, to any prospective transferee of any Note):
(i) within 120 days after the end of each fiscal year of each
Reported Company, a copy of such Reported Company's Financial Statements,
all in reasonable detail and accompanied by an opinion of a firm of
independent certified public accountants (which shall be (i) Molatore,
Peugh, McDaniel, Scroggin & Co. LLP, (ii) a legal successor thereto, or
(iii) a nationally recognized accounting firm) stating that such financial
statements present fairly the financial condition of such Reported Company
(or, in the case of a successor Servicer, such successor Servicer's
financial condition) and have been prepared in accordance with generally
accepted accounting principles consistently applied (except for changes in
application in which such accountants concur), and that the examination of
such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards, and
accordingly included such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(ii) within 60 days of the end of each fiscal quarter, unaudited
versions of each Reported Company's consolidated balance sheet and income
statement; and
(iii) with the Issuer's, the Servicer's and Trendwest's (if Trendwest
is not the Servicer) Financial Statements delivered pursuant to
subsections (a)(i) and (a)(ii) above, each of the Issuer, the Servicer and
Trendwest (if Trendwest is not the Servicer) deliver an Officer's
Certificate stating that such officer has reviewed the relevant terms of
the Indenture, the Sale Agreement, the Receivables Purchase Agreement and
this Agreement and has made, or caused to be made, under such officer's
supervision, a review of the transactions and conditions of such Reported
Company during the period covered by such Reported Company's Financial
Statements then being furnished, that the review has not disclosed the
existence of any Default or Event of Default under the Indenture or any
Servicer Default or Servicer Event of Default or, if a Default or Event of
Default under the Indenture or a Servicer Default or a Servicer Event of
Default exists, describing its nature, and the Issuer, with respect to a
Default or Event of Default, or the Servicer, with respect to a Servicer
Default or a Servicer Event of Default, describing what action such Person
has taken and is taking with respect thereto, and that on the basis of
such review the
-13-
<PAGE> 17
officer signing such certificate is of the opinion that during such period
the Servicer has serviced the Contracts in compliance with the procedures
hereof except as disclosed in such certificate;
(iv) with each Reported Company's Financial Statements delivered
pursuant to subsections (a)(i) and (a)(ii) above, each Reported Company
shall deliver an Officer's Certificate stating that such financial
statements present fairly the financial condition of such Reported
Company;
(v) immediately upon becoming aware of the existence of any
condition or event which constitutes a Servicer Default, a Servicer Event
of Default, a Subservicer Default or a Subservicer Event of Default
hereunder, a Default or an Event of Default under the Indenture, Sale
Agreement or Receivables Purchase Agreement, or a Trigger Event or Cash
Accumulation Event under the Indenture, a written notice describing its
nature and period of existence and what action the Servicer is or proposes
to take with respect thereto;
(vi) promptly upon the Servicer's becoming aware of:
(A) any proposed or pending investigation of it, the
Subservicer, the Club or the Issuer by any governmental authority
or agency, or
(B) any pending or proposed court or administrative proceeding
which involves or may involve the possibility of materially and
adversely affecting the properties, business, prospects, profits or
condition (financial or otherwise) of the Servicer, the Subservicer,
TFI, SPC, the Club or the Issuer,
a written notice specifying the nature of such investigation or proceeding
and what action the Servicer is taking or proposes to take with respect
thereto and evaluating its merits; and
(vi) with reasonable promptness any other data and information which
may be reasonably requested from time to time, including without
limitation any information required to be made available at any time to
any prospective transferee of any Notes in order to satisfy the
requirements of Rule 144A under the Securities Act of 1933, as amended.
(b) On or before each April 30, so long as any of the Notes are
outstanding, the Servicer shall furnish to the Trustee an Officer's Certificate
either stating that such action has been taken with respect to the recording,
filing, and rerecording and refiling of any financing statements and
continuation statements as necessary to maintain the interest of the Trustee
created by the Indenture, TFI or SPC created by the Sale Agreement and TFI
created Receivables Purchase Agreement with respect to the Trust Estate and
reciting the details of such action or stating that no such action is necessary
to maintain such interest. Such Officer's Certificate shall also describe the
recording, filing, rerecording and refiling
-14-
<PAGE> 18
of any financing statements and continuation statements that will be required to
maintain the interest of the Trustee in the Trust Estate until the date such
next Officer's Certificate is due.
Section 4.03. Independent Accountants' Reports. (a) Within thirty (30) days
of the Closing Date, the Servicer shall, at its expense, cause the Independent
Accountants to prepare a report, a form of which is attached as Exhibit B
hereto, to the effect that such Independent Accountants have reviewed a
statistically significant random sample (at the 95% confidence level) of the
Custodian Files and that such reviewed Custodian Files are in the possession of
the Subservicer and properly accounted for in the Subservicer's records.
(b) For each fiscal year (commencing with the fiscal year ending December
31, 1996), the Servicer at its expense shall cause the Independent Accountants
(who may also render and deliver other services to the Servicer and its
Affiliates) to prepare a report that shall include the information set forth in
the report set forth in paragraph (a) of this Section 4.03 and which shall also
include a report addressed to the Servicer, the Trustee and the Noteholders as
of the close of such year, to the effect that the Independent Accountants have
compared the information contained in the Monthly Servicer's Reports delivered
for a random three-month period during the relevant period with information
contained in the accounts and records for such period, and, where applicable, on
the basis of such procedures and comparison, report matters which come to the
Independent Accountants' attention to indicate that the information contained in
the Monthly Servicer's Reports does not reconcile with the information contained
in the Servicer's accounts and records. If any letter delivered pursuant to this
Section 4.03 (commencing with the letter relating to the fiscal year ending
December 31, 1996) discloses such exceptions, the Servicer at its expense shall
cause the Independent Accountants to deliver an agreed-upon procedures letter
addressed to the Servicer, the Trustee and the Noteholders for each subsequent
three-month period. Such obligation shall continue until the Independent
Accountants deliver a letter relating to a three-month period that does not
disclose any such exceptions. Thereafter, the Servicer shall cause a letter to
be delivered relating to each fiscal year in accordance with the first sentence
of this Section 4.03. The Servicer shall deliver to the Trustee a copy of any
such reports within 90 days of the close of the relevant period.
Section 4.04. Access to Certain Documentation and Information. (a) Each of
the Servicer and the Subservicer shall provide to the Trustee or any Noteholder
and their duly authorized representatives, attorneys or accountants access to
any and all documentation and to any existing data processing systems
(including, but not limited to, any data that can reasonably be generated
therefrom) regarding the Trust Estate (including the Contract Schedule) that the
Servicer and the Subservicer may possess, such access being afforded without
charge but only upon reasonable request and during normal business hours so as
not to interfere unreasonably with the Servicer's or Subservicer's normal
operations or customer or employee relations, at offices of the Servicer and the
Subservicer designated by the Servicer and the Subservicer. If a Servicer Event
of Default, a Subservicer Event of Default, a Cash Accumulation Event or a
Trigger Event has occurred, the reasonable costs of providing the foregoing
shall be borne by the Servicer; otherwise, the Person seeking the foregoing
shall pay its, his or her own expenses relating to the foregoing.
-15-
<PAGE> 19
(b) At all times during the term hereof, the Servicer shall keep available
at its principal executive office for inspection by Noteholders and the Trustee
a list of all Contracts the interests in which are then held as a part of the
Trust Estate, together with a reconciliation of such list to that set forth in
the Contract Schedule and each of the Monthly Servicer's Reports, indicating the
cumulative addition and removal of the Issuer's interest in the Contracts from
the Trust Estate.
(c) Each of the Servicer and the Subservicer will maintain accounts and
records as to each respective Contract serviced by the Servicer and the
Subservicer that are accurate and sufficiently detailed as to permit (i) the
reader thereof to know as of the most recent Calculation Date the status of such
Contract, including any payments, Residual Proceeds and Recoveries received or
owing (and the nature of each) thereon and (ii) the reconciliation between
payments, Residual Proceeds or Recoveries on (or with respect to) each Contract
and the amounts from time to time deposited in the Collection Account in respect
of such Contract.
(d) Each of the Servicer and the Subservicer will maintain all of its
computerized accounts and records so that, from and after the time of the
acquisition of an interest in the Purchased Assets by the Issuer, the Servicer's
and the Subservicer's accounts and records (including any back-up computer
archives) that refer to any Contract, Receivable or Credits indicate clearly
that the Receivables are owned by the Issuer and are pledged, together with the
Issuer's security interest in the related Credits, to the Trustee for the
benefit of the Noteholders. Indication of the Trustee's interest in a Receivable
will be deleted from or modified on the Servicer's accounts and records when,
and only when, the Receivable or related Contract has been paid in full,
replaced with a Substitute Contract or purchased by Trendwest or the Issuer or
assigned to the Servicer pursuant to this Agreement, as the case may be.
(e) Nothing in this Section 4.04 shall affect the obligation of the
Servicer or the Subservicer to observe any applicable law prohibiting disclosure
of information regarding the Obligors, and the failure to provide information
otherwise required by this Section 4.04 as a result of such observance by the
Servicer, shall not constitute a breach of this Section 4.04.
(f) All information obtained by the Trustee or any Noteholder regarding
any Reported Company (pursuant to Section 4.02 or otherwise), the Obligors and
the Contracts, whether upon exercise of its rights under this Section 4.04 or
otherwise, shall be maintained by the Trustee and the Noteholder, as applicable,
in confidence in accordance with procedures adopted by the Trustee or such
Noteholder, as applicable, in good faith to protect such confidential
information; provided that the Trustee and any Noteholder may deliver or
disclose such confidential information to (i) their directors, officers,
employees, agents, attorneys and affiliates (to the extent such disclosure
reasonably relates to the administration of the investment represented by the
Notes), (ii) their financial advisors and other professional advisors who agree
to hold confidential such information substantially in accordance with the terms
of this Section 4.04(f), (iii) any other holder of any Note, (iv) any
Institutional Investor to which any Noteholder sells or offers to sell such Note
or
-16-
<PAGE> 20
any part thereof or any participation therein (if such Person has agreed in
writing prior to its receipt of such confidential information to be bound by the
provisions of this Section 4.04(f)), (v) any federal or state regulatory
authority having jurisdiction over the Trustee or any Noteholder, (vi) the
National Association of Insurance Commissioners or any similar organization, or
any nationally recognized rating agency that requires access to information
about the Noteholders' investment portfolio or (vii) any other Person to which
such delivery or disclosure may be necessary or appropriate (w) to effect
compliance with any law, rule, regulation or order applicable to the Trustee or
any Noteholder, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which the Trustee or any Noteholder is a party
or (z) if an Event of Default has occurred and is continuing, to the extent the
Trustee or any Noteholder may reasonably determine such delivery and disclosure
to be necessary or appropriate in the enforcement or for the protection of the
rights and remedies under the Notes and this Agreement.
Section 4.05. Trustee to Cooperate. Upon payment (including through
application of any prepayment) in full of any Contract, the Servicer will notify
the Trustee by written certification (which certification shall include a
statement to the effect that all amounts received in connection with such
payments in full which are required to be deposited in the Clearing Account
pursuant to Section 3.03 hereof have been so deposited) of a Servicing Officer
and shall request delivery of the Contract to the Servicer in accordance with
Section 1.3 of the Custodian Agreement. Upon receipt of such delivery request,
the Custodian shall, within 7 days of such request by the Servicer, release such
Contract to the Servicer in accordance with the Custodian Agreement. Upon
release of such Contract, the Servicer is authorized to execute an instrument in
satisfaction of such Contract and to do such other acts and execute such other
documents as it deems necessary to discharge the Obligor thereunder and, if
applicable, release any security interest in the Credits related thereto. The
Servicer shall determine when a Contract has been paid in full. Upon the written
request of a Servicing Officer and subject to the Trustee's rights to indemnity
contained herein and in the Indenture, the Trustee shall perform such other acts
as reasonably requested in writing by the Servicer and otherwise cooperate with
the Servicer in enforcement of the Noteholders' rights and remedies with respect
to Contracts.
Section 4.06. Oversight of Servicing. (a) Prior to each Payment Date,
the Trustee shall review the Monthly Servicer's Report related thereto and
shall determine the following:
(i) that such Monthly Servicer's Report is complete on its face;
(ii) that the amounts credited to and withdrawn from the Collection
Account and the Reserve Account, and to be transferred to and withdrawn
from the Distribution Account and the balance of each such account, as set
forth in the records of the Trustee, are the same as the amount set forth
in the Monthly Servicer's Report;
(iii) that the Servicer has properly calculated the aggregate amounts
that are to be distributed pursuant to clauses (i), (ii)(A), (iii), (iv),
(v) and (vi) of Section 12.02(d) of the Indenture on such Payment Date;
and
-17-
<PAGE> 21
(iv) based solely on information set forth in the Monthly Servicer's
Report, determine that the Projected Income for the related Due Period
equals the sum of payments received as principal and interest from
Obligors due in such Due Period plus the amount of principal and interest
not paid on Delinquent Contracts and Defaulted Contracts (including
amounts due by virtue of canceled or bounced checks or other reversed
payments) minus any payments due in other Due Periods that were paid in
such Due Period (both late payments and prepayments).
(b) In the event of any discrepancy between the information set forth in
subparagraph (a) as calculated by the Servicer from that determined or
calculated by the Trustee, the Trustee shall promptly notify the Servicer of
such discrepancy. If within 30 days of such notice being provided to the
Servicer, the Trustee and the Servicer are unable to resolve such discrepancy,
the Trustee shall promptly notify the Holders of the Notes of such discrepancy.
(c) Based solely on the information included in the Contract Schedule
delivered on the Closing Date and the electronic reports provided on each
Payment Date thereafter, the Trustee shall determine that any Substitute
Contracts delivered under Section 3.10 satisfy the Substitution Criterion
described in clause (i) of the second sentence of Section 3.04(b) of the Sale
Agreement and clause (i) of the second sentence of Section 3.04(b) of the
Receivables Purchase Agreement.
(d) Other than as specifically set forth elsewhere in this Agreement, the
Trustee shall have no obligation to supervise, verify, monitor or administer the
performance of the Servicer or the Subservicer and shall have no liability for
any action taken or omitted by the Servicer or the Subservicer.
(e) The Trustee shall consult fully with the Servicer and the Subservicer
as may be necessary from time to time to perform or carry out the Trustee's
obligations hereunder, including the obligation to choose at any time a
successor to the duties and obligations of the Servicer as servicer or
Subservicer under Section 6.02 hereof.
(f) The Subservicer shall provide the Trustee with a copy of the software
that the Subservicer uses to service the Contracts, and the Trustee shall
maintain possession of such software in a manner that will protect the
proprietary information therein. The Trustee shall be under no obligation to
load the software onto its computer systems and may not release such software to
a third party unless the Subservicer is removed or otherwise is no longer acting
as the Subservicer. The Trustee shall return such software upon final payment of
all amounts due on the Notes.
ARTICLE 5
THE SERVICER, THE SUBSERVICER AND THE ISSUER
Section 5.01. Servicer and Subservicer Indemnification. (a) The Servicer
shall indemnify and hold harmless the Trustee, TFI, SPC, the Issuer, and the
Trust Estate, for the
-18-
<PAGE> 22
benefit of the Noteholders, from and against any loss, liability, claim,
expense, damage or injury suffered or sustained to the extent that such loss,
liability, claim, expense, damage or injury arose out of or was imposed by
reason of the failure by the Servicer to perform its duties under this Agreement
or are attributable to errors or omissions of the Servicer related to such
duties; provided, however, that the Servicer shall not indemnify any party to
the extent that acts of fraud, gross negligence or breach of fiduciary duty by
such party contributed to such loss, liability, claim, expense, damage or
injury.
(b) The Subservicer shall indemnify and hold harmless the Trustee, TFI,
SPC, the Issuer, the Servicer and the Trust Estate, for the benefit of the
Noteholders, from and against any loss, liability, claim, expense, damage or
injury suffered or sustained to the extent that such loss, liability, claim,
expense, damage or injury arose out of or was imposed by reason of the failure
by the Subservicer to perform its duties under this Agreement or are
attributable to errors or omissions of the Subservicer related to such duties;
provided, however, that the Subservicer shall not indemnify any party to the
extent that acts of fraud, gross negligence or breach of fiduciary duty by such
party contributed to such loss, liability, claim, expense, damage or injury.
(c) Indemnification under this Section 5.01 shall include, without
limitation, reasonable fees and expenses of counsel and expenses of litigation
reasonably incurred. If the Servicer or Subservicer has made any indemnity
payments to the Trustee or the Noteholders pursuant to this Section and such
party thereafter collects any of such amounts from others, such party will
promptly repay such amounts collected to the Servicer or Subservicer, as
applicable, without interest. The provisions of this Section 5.01 shall survive
any expiration or termination of this Agreement.
Section 5.02. Corporate Existence; Reorganizations. (a) The Servicer and the
Subservicer shall keep in full effect their existence and good standing as
corporations in the State of their incorporation and will obtain and preserve
their qualification to do business as foreign corporations in each jurisdiction
in which such qualification is or shall be necessary to enable the Servicer or
the Subservicer to perform their duties under this Agreement, except where the
failure to so qualify would not have a material adverse effect on the Trust
Estate or the ability of the Servicer or the Subservicer to perform their duties
hereunder; provided, however, that the Servicer and the Subservicer may
reincorporate in another State, if to do so would be in the best interests of
the Servicer or the Subservicer and would not have a material adverse effect
upon the Noteholders.
(b) Neither the Servicer nor the Subservicer shall (i) convey, transfer or
lease substantially all of its assets as an entirety to any Person, or (ii)
merge or consolidate with another Person, unless such Person or the merged or
consolidated entity acquires substantially all the assets of the Servicer or the
Subservicer, as the case may be, as an entirety and executes and delivers to the
Issuer and the Trustee an agreement, in form and substance reasonably
satisfactory to the Issuer and the Trustee, which contains an assumption by such
Person or entity of the due and punctual performance and observance of each
covenant and condition to be performed or observed by the Servicer or the
Subservicer, as the case may be, under this Agreement; provided that nothing
herein shall prevent the
-19-
<PAGE> 23
Servicer from selling contracts and receivables which are not Purchased Assets
pursuant to a receivables financing.
Section 5.03. Limitation on Liability of the Servicer, the Subservicer and
Others. Except as provided in Section 5.01, the Servicer, the Subservicer and
any of the officers, directors, employees or agents of the Servicer or the
Subservicer shall not be under any liability for any action taken or for
refraining from the taking of any action in their capacity as Servicer or
Subservicer pursuant to this Agreement; provided, however, that this provision
shall not protect the Servicer or Subservicer or any such Person against any
liability which would otherwise be imposed by reason of willful misconduct, bad
faith or negligence (which includes negligence with respect to the duties of the
Servicer or Subservicer explicitly set forth in this Agreement) in the
performance of its duties hereunder. The Servicer, the Subservicer and any
officer, director, employee or agent of the Servicer or the Subservicer may rely
in good faith on any document of any kind prima facie properly executed and
submitted by any Person with respect to any matters arising hereunder. No
implied covenants or obligations shall be read into the Servicing Agreement
against the Servicer or the Subservicer. In the event the Servicer or the
Subservicer perform any activities beyond the requirements of this Agreement,
they shall have the option but will not be required to perform such activities
in the future.
Section 5.04. The Servicer and Subservicer Not to Resign. (a) Neither the
Servicer nor the Subservicer shall resign from the duties and obligations hereby
imposed on it by this Agreement except upon a determination by the Board of
Directors of the Servicer or Subservicer, as the case may be, that by reason of
change in applicable legal requirements, with which the Servicer or Subservicer,
as the case may be, cannot reasonably comply, the continued performance by the
Servicer or the Subservicer, as the case may be, of its duties under this
Agreement would cause it to be in violation of such legal requirements, said
determination to be evidenced by a resolution from the appropriate Board of
Directors to such effect, accompanied by an Opinion of Counsel to such effect
and reasonably satisfactory to the Trustee.
(b) No such resignation shall become effective until a successor Servicer
or Subservicer, as the case may be, shall have assumed the responsibilities and
obligations of the Servicer or Subservicer hereunder.
(c) Except as provided in Sections 5.02 and 6.01 hereof, the duties and
obligations of the Servicer and Subservicer under this Agreement shall continue
until this Agreement shall have been terminated as provided in Section 8.01
hereof, and shall survive the exercise by the Issuer or the Trustee of any right
or remedy under this Agreement, or the enforcement by the Issuer, the Trustee or
any Noteholder of any provision of the Notes or this Agreement.
Section 5.05. Issuer Indemnification. The Issuer shall indemnify and hold
harmless the Servicer and the Subservicer (but solely from the amounts to be
distributed as set forth in Sections 12.02(d)(xiv) and 12.03(d)(ii) of the
Indenture) from and against any loss, liability, expense, damage or injury
suffered or sustained by the Servicer or the Subservicer, including but not
limited to any judgment, award, settlement, reasonable attorneys' fees and other
costs and expenses incurred in connection with the defense of any actual or
threatened
-20-
<PAGE> 24
action, proceeding or claim, which arises out of the Servicer's or the
Subservicer's activities hereunder; provided, however, that the Issuer shall not
indemnify the Servicer or the Subservicer if the Servicer's or the Subservicer's
activities constituted fraud, willful misconduct, negligence (which includes
negligence with respect to the duties of the Servicer which are explicitly set
forth in this Agreement) or breach of fiduciary duty by the Servicer or the
Subservicer for any amounts for which the Servicer or Subservicer is obligated
to indemnify the Issuer or other Persons pursuant to Section 5.01 hereof.
ARTICLE 6
SERVICING TERMINATION
Section 6.01. Servicer Events of Default. (a) Any of the following
acts or occurrences shall constitute a Servicer Event of Default:
(i) any failure by the Servicer to deliver to the Subservicer for
payment to Noteholders any proceeds or payments received from an Obligor
or in respect of the Trust Estate and required to be so delivered under
the terms of the Indenture and this Agreement that continues unremedied
until 1:00 p.m., Chicago time, on the second successive Business Day
following such failure; provided, however, that the Subservicer, upon
receiving actual knowledge of such failure, shall give the Servicer and
the Trustee prompt written, telecopied or telephonic notice of such
failure. Notwithstanding the foregoing, any failure by the Subservicer to
deliver such notice to the Servicer shall not prevent the occurrence of a
Servicer Event of Default; or
(ii) any failure by the Servicer to deliver a Monthly Servicer's
Report pursuant to Section 4.01 hereof that continues unremedied until
1:00 p.m., Chicago time, the following Business Day; provided, however,
that if the Trustee has actual knowledge that the Servicer has not
delivered the Monthly Servicer's Report by 1:00 p.m., Chicago time, on a
Determination Date, the Trustee shall give the Servicer written,
telecopied or telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice to the
Servicer shall not prevent the occurrence of a Servicer Event of Default;
or
(iii) any failure by the Servicer to remit any Purchase Price received
by it to the Subservicer that continues unremedied until 4:00 p.m.,
Chicago time, the following Business Day; provided, however, that if the
Servicer has not remitted any Purchase Price received by it to the
Subservicer by 2:00 p.m., Chicago time, on the Determination Date and the
Trustee has received written notification from the Subservicer by way of
the Monthly Servicer's Report or otherwise that such Purchase Price has
not been paid, the Trustee shall give the Servicer prompt written,
telecopied or telephonic notice of such failure. Notwithstanding the
foregoing, any failure by the Trustee to deliver such notice to the
Servicer shall not prevent the occurrence of a Servicer Event of Default;
or
-21-
<PAGE> 25
(iv) any failure by the Servicer to make remittances (other than a
remittance of Purchase Price referred to in clause (iii) above) or deliver
notices pursuant to Section 3.03 hereof, that continues unremedied until
1:00 p.m., Chicago time, of the second successive Business Day; or
(v) any failure on the part of the Servicer duly to observe or
perform any other covenants or agreements of the Servicer set forth in
this Agreement or the Indenture, as the case may be, or any representation
or warranty of the Servicer set forth in Section 2.01 of this Agreement
shall prove to be incorrect in any material respect, which failure or
breach continues unremedied for a period of 30 days after the date on
which the Servicer becomes aware of such failure or breach, or receives
written notice of such failure or breach; or
(vi) any assignment by the Servicer to a delegate of its duties or
rights under this Agreement, except as specifically permitted hereunder,
or any attempt to make such an assignment; or
(vii) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Servicer or a petition against the Servicer
in an involuntary case under any federal bankruptcy laws, as now or
hereafter in effect, or any other present or future federal or state
bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official for the Servicer or for any substantial part of its property, or
ordering the winding up or liquidation of the affairs of the Servicer and
the continuance of any such decree or order unstayed and in effect, or
failure for such petition to be dismissed, for a period of 60 consecutive
days; or
(viii) the commencement by the Servicer of a voluntary case under any
federal bankruptcy laws, as now or hereafter in effect, or any other
present or future federal or state bankruptcy, insolvency, reorganization
or similar law, or the consent by the Servicer to the appointment of or
taking possession by a conservator, receiver, liquidator, assignee,
trustee, custodian, sequestrator or other similar official in any
insolvency, readjustment of debt, marshaling of assets and liabilities,
bankruptcy or similar proceedings of or relating to the Servicer relating
to a substantial part of its property, or the making by the Servicer of an
assignment for the benefit of creditors, or the failure by the Servicer
generally to pay its debts as such debts become due or if the Servicer
shall admit in writing its inability to pay their debts as they become
due, or the taking of corporate action by the Servicer in furtherance of
any of the foregoing; or
(ix) the stockholders' equity of the Servicer and its consolidated
subsidiaries, determined in accordance with generally accepted accounting
principles, as would be shown on a consolidated balance sheet for such
Persons, is below $5,000,000; or
(x) the occurrence of a Trigger Event if the initial Servicer
is the Servicer; or
-22-
<PAGE> 26
(xi) the occurrence of a Subservicer Event of Default.
(b) If a Servicer Event of Default shall have occurred and be continuing,
the Trustee shall, upon written direction of the Holders of Notes representing
not less than 66-2/3% in principal amount of the Notes Outstanding, by notice
(the "Servicer Termination Notice") given in writing to the Servicer terminate
all, but not less than all, of the rights and obligations (except as expressly
provided herein) of the Servicer under this Agreement. Notwithstanding the
foregoing, a delay in or failure of performance under Sections 6.01(a)(ii) or
6.01(a)(v) hereof for a period of 30 or more days shall not constitute a
Servicer Event of Default if such delay or failure could not have been prevented
by the exercise of reasonable diligence by the Servicer and such delay or
failure was caused by acts of declared or undeclared war, public disorder,
rebellion or sabotage, epidemics, landslides, lightning, fire, hurricanes,
earthquakes, floods or similar causes; provided, however, that in any event,
such delay or failure shall constitute a Servicer Event of Default if it
continues unremedied for a period of 35 days. The preceding sentence shall not
relieve the Servicer from using its best efforts to perform its obligations in a
timely manner in accordance with the terms of this Agreement, and the Servicer
shall provide the Trustee, the Issuer and the Noteholders with prompt notice of
such failure or delay by it or the Subservicer, together with a description of
its efforts to so perform its obligations.
(c) [Reserved]
(d) On or after the receipt by the Servicer of a Servicer Termination
Notice, all authority and power of the Servicer under this Agreement, whether
with respect to the Notes or the Contracts or otherwise, shall pass to and be
vested in the successor Servicer appointed pursuant to Section 6.02 hereof, and,
without limitation, such successor Servicer is hereby authorized and empowered
to execute and deliver, on behalf of the Servicer, as attorney-in-fact or
otherwise, any and all documents and other instruments, and to do or accomplish
all other acts or things necessary or appropriate to effect the purposes of such
notice of termination, whether to complete the transfer of the Contracts and
related documents, or otherwise. The Servicer agrees to cooperate with the
Trustee and the successor Servicer in effecting the termination of the
responsibilities and rights of the Servicer hereunder, including, without
limitation, the transfer to the successor Servicer for administration by it of
all cash amounts that shall at the time be held by the Servicer for deposit, or
have been deposited by the Servicer or thereafter received with respect to
Contracts. To assist the successor Servicer in enforcing all rights under the
Contracts, the outgoing Servicer, at its own expense, shall transfer its records
(electronic and otherwise) relating to such Contracts to the successor Servicer
in such form as the successor Servicer may reasonably request and shall transfer
the related Contracts (to the extent not held by the Trustee) and all other
records, correspondence and documents relating to the Contracts that it may
possess to the successor Servicer in the manner and at such times as the
successor Servicer shall reasonably request.
Section 6.02. Appointment of Successor Servicer. (a)(i) On and after the
time at which the Servicer resigns as Servicer pursuant to Section 5.04 hereof
or is terminated as Servicer pursuant to Section 6.01 hereof, the Trustee shall,
at the direction of Holders of
-23-
<PAGE> 27
Notes representing not less than 66-2/3% in principal amount of the Notes
Outstanding appoint a successor Servicer.
(ii) The successor Servicer shall be the successor in all respects to the
Servicer in its capacity as Servicer under this Agreement, and the transactions
set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the Servicer
by the terms and provisions hereof; provided, however, that any such successor
shall not be liable for any acts or omissions of the outgoing Servicer or for
any breach by the outgoing Servicer of any of its representations and warranties
contained herein or in any related document or agreement. Subject to the consent
of the Holders representing not less than 66-2/3% in principal amount of the
Notes Outstanding, the successor Servicer may subcontract with another firm to
act as subservicer so long as the successor Servicer remains fully responsible
and accountable for performance of all obligations of the Servicer on and after
the time the Servicer receives the Servicer Termination Notice. The successor
Servicer shall be entitled to the Servicer Fee in connection with acting as
Servicer hereunder.
(b) The Servicer, the Subservicer, the Issuer, the Trustee and any
successor Servicer or successor Subservicer shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Upon any succession, such successor Servicer as well as any successor
Subservicer shall notify the Obligors that it has been appointed Servicer under
this Agreement with respect to the Contracts.
Section 6.03. Notification to Noteholders. The Servicer shall promptly
notify the Subservicer, the Issuer and the Trustee of any Servicer Event of
Default upon actual knowledge thereof by an officer of the Servicer. Upon any
termination of, or appointment of a successor to, the Servicer pursuant to this
Article 6, the Trustee shall give prompt written notice thereof to the
Noteholders at their respective addresses appearing in the Note Register.
Section 6.04. Waiver of Past Defaults. The Trustee shall, at the direction
of the Holders of Notes representing not less than 66-2/3% in principal amount
of the Notes Outstanding, on behalf of all Noteholders, waive any default by the
Servicer in the performance of its obligations hereunder and its consequences,
other than a default with respect to required deposits and payments in
accordance with Article 3 or a default of the type set forth in clause (vii) or
(viii) of Section 6.01(a) hereof, which waiver shall require the consent of each
Noteholder. Upon any such waiver of a past default, such default shall cease to
exist, and any Servicer Event of Default arising therefrom shall be deemed to
have been remedied for every purpose of this Agreement. No such waiver shall
extend to any subsequent or other default or impair any right consequent thereon
except to the extent expressly waived.
Section 6.05. Effects of Termination of Servicer. (a) Upon the appointment
of a successor Servicer, the predecessor Servicer shall remit any Scheduled
Payments and any other payments or proceeds that such predecessor may receive
pursuant to any Contract or otherwise to such successor after such date of
appointment.
-24-
<PAGE> 28
(b) After the delivery of a Servicer Termination Notice, the outgoing
Servicer shall have no further obligations with respect to the management,
administration, servicing, enforcement, custody or collection of the Contracts,
and the successor Servicer shall have all of such obligations, except that the
outgoing Servicer will transmit or cause to be transmitted directly to such
successor Servicer promptly on receipt and in the same form in which received,
any amounts held by the outgoing Servicer (properly endorsed where required for
such successor to collect them) received as payments upon or otherwise in
connection with the Contracts. The outgoing Servicer's indemnification
obligations pursuant to Section 5.01 hereof will survive the termination of the
Servicer but will not extend to any acts or omissions of a successor Servicer.
Section 6.06. No Effect on Other Parties. (a) Upon any termination of the
rights and powers of the Servicer pursuant to Section 6.01, or upon any
appointment of a successor Servicer, all the rights, powers, duties and
obligations of Trendwest under this Agreement, the Indenture, the Receivables
Purchase Agreement and the Sale Agreement, other than Trendwest's rights,
powers, duties and obligations as Servicer therein, shall remain unaffected by
such termination or appointment and shall remain in full force and effect
thereafter.
ARTICLE 7
THE SUBSERVICER
Section 7.01. Representations and Warranties. The Subservicer makes
the following representations and warranties to the Trustee and for the
benefit of the Noteholders which shall survive the Closing Date:
(a) Organization and Good Standing. The Subservicer has been duly
incorporated and is validly existing in good standing as a corporation
under the laws of the State of Washington, with requisite corporate power
and authority to own its properties, perform its obligations under this
Agreement and to transact the business in which it is now engaged or in
which it proposes to engage; the Subservicer is duly qualified to do
business and is in good standing in each State in which the nature of its
business requires it to be so qualified, except where failure to so
qualify would not have a material adverse effect on the ability of the
Subservicer to perform its obligations under this Agreement.
(b) Authorization and Binding Obligation. This Agreement has been
duly authorized, executed and delivered by the Subservicer and constitutes
the valid and legally binding obligation of the Subservicer enforceable
against the Subservicer in accordance with its terms, subject as to
enforcement to any bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity regardless of whether
enforcement is sought in a court of equity or law.
-25-
<PAGE> 29
(c) No Violation. The entering into of this Agreement and the
performance by the Subservicer of its obligations under this Agreement and
the consummation of the transactions contemplated herein will not conflict
with or result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or imposition of any
lien, charge or encumbrance upon any of the property or assets of the
contemplated pursuant to the terms of any material indenture, mortgage,
deed of trust or other agreement or instrument to which it is a party or
by which it is bound or to which any of its property or assets is subject,
nor will such action result in any violation of the provisions of its
Articles of Incorporation or By-laws, or any statute or any order, rule or
regulation of any court or any regulatory authority or other governmental
agency or body having jurisdiction over it or any of its properties; and
no consent, approval, authorization, order, registration or qualification
of or with any court, or any such regulatory authority or other
governmental agency or body is required for the Subservicer to enter into
this Agreement.
(d) No Proceedings. There are no proceedings or investigations
pending, or to the knowledge of the Subservicer, threatened against or
affecting the Subservicer or any subsidiary in or before any court,
governmental authority or agency or arbitration board or tribunal,
including but not limited to any such proceeding or investigation with
respect to any environmental or other liability resulting from its
business which, individually or in the aggregate, involve the possibility
of materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of the Subservicer, or the
ability of the Subservicer to perform its obligations under this
Agreement. The Subservicer is not in default with respect to any order of
any court, governmental authority or agency or arbitration board or
tribunal.
(e) Approvals. The Subservicer (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, (ii)
has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property or
to the conduct of its business, and (iii) is not in violation in any
material respect of any term of any agreement, charter instrument, bylaw
or instrument to which it is a party or by which it may be bound, which
violation or failure to obtain materially adversely affect the business or
condition (financial or otherwise) of the Subservicer and its
subsidiaries.
Section 7.02. Subservicer Events of Default. (a) Any of the following
acts or occurrences shall constitute a Subservicer Event of Default:
(i) any failure by the Subservicer to deliver to the Clearing
Account Bank for deposit in the Clearing Account any proceeds or payments
received from an Obligor or the Servicer or in respect of the Trust Estate
and required to be so delivered under the terms of the Indenture and this
Agreement that continues unremedied until 1:00 p.m., Chicago time, on the
second successive Business Day following such failure; provided, however,
that the Trustee, upon receiving actual knowledge of such failure, shall
give the Subservicer prompt written, telecopied or
-26-
<PAGE> 30
telephonic notice of such failure. Notwithstanding the foregoing, any
failure by the Trustee to deliver such notice to the Subservicer shall not
prevent the occurrence of a Subservicer Event of Default; or
(ii) any failure on the part of the Subservicer duly to observe or
perform any other covenants or agreements of the Subservicer set forth in
this Agreement, or any representation or warranty of the Subservicer set
forth in Section 7.01 of this Agreement shall prove to be incorrect in any
material respect, which failure or breach continues unremedied for a
period of 30 days after the date on which the Subservicer becomes aware of
such failure or breach, or receives written notice of such failure or
breach; or
(iii) any assignment by the Subservicer to a delegate of its duties or
rights under this Agreement, except as specifically permitted hereunder,
or any attempt to make such an assignment; or
(iv) the entry of a decree or order for relief by a court having
jurisdiction in respect of the Subservicer or a petition against the
Subservicer in an involuntary case under any federal bankruptcy laws, as
now or hereafter in effect, or any other present or future federal or
state bankruptcy, insolvency or similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official for the Subservicer or for any substantial part of its property,
or ordering the winding up or liquidation of the affairs of the
Subservicer and the continuance of any such decree or order unstayed and
in effect, or failure for such petition to be dismissed, for a period of
60 consecutive days; or
(v) the commencement by either the Subservicer of a voluntary case
under any federal bankruptcy laws, as now or hereafter in effect, or any
other present or future federal or state bankruptcy, insolvency,
reorganization or similar law, or the consent by either the Subservicer to
the appointment of or taking possession by a conservator, receiver,
liquidator, assignee, trustee, custodian, sequestrator or other similar
official in any insolvency, readjustment of debt, marshaling of assets and
liabilities, bankruptcy or similar proceedings of or relating to the
Subservicer relating to a substantial part of its property, or the making
by the Subservicer of an assignment for the benefit of creditors, or the
failure by the Subservicer generally to pay its debts as such debts become
due or if the Subservicer shall admit in writing its inability to pay
their debts as they become due, or the taking of corporate action by the
Subservicer in furtherance of any of the foregoing; or
(b) If a Subservicer Event of Default shall have occurred and be
continuing, then the Trustee shall, upon written direction of the Holders of
Notes representing 66-2/3% in principal amount of the Notes Outstanding, by
notice (the "Subservicer Termination Notice") given in writing to the
Subservicer terminate all, but not less than all, of the rights and obligations
of the Subservicer under this Agreement. Notwithstanding the foregoing, a delay
in or failure of performance under Sections 7.02(a)(ii) hereof for a period of
30 or more days shall not constitute a Subservicer Event of Default if such
delay or failure could
-27-
<PAGE> 31
not have been prevented by the exercise of reasonable diligence by the
Subservicer and such delay or failure was caused by acts of declared or
undeclared war, public disorder, rebellion or sabotage, epidemics, landslides,
lightning, fire, hurricanes, earthquakes, floods or similar causes; provided,
however, that in any event, such delay or failure shall constitute a Subservicer
Event of Default if it continues unremedied for a period of 35 days. The
preceding sentence shall not relieve the Subservicer from using its best efforts
to perform its obligations in a timely manner in accordance with the terms of
this Agreement, and the Subservicer shall provide the Trustee, the Issuer and
the Noteholders with prompt notice of such failure or delay by it, together with
a description of its efforts to so perform its obligations.
Section 7.03. Appointment of Successor Subservicer. (a)(i) On and after the
time at which Subservicer resigns pursuant to Section 5.04 hereof or is
terminated as Subservicer pursuant to Section 7.02(b) hereof, the Trustee shall,
at the direction of Holders of Notes representing at least 66-2/3% in principal
amount of the Notes Outstanding appoint a successor Subservicer.
(ii) The successor Subservicer shall be the successor in all respects to
the Subservicer in its capacity as Subservicer under this Agreement, and the
transactions set forth or provided for herein and shall be subject to all the
responsibilities, duties and liabilities relating thereto placed on the
Subservicer by the terms and provisions hereof; provided, however, that any such
successors shall not be liable for any acts or omissions of the outgoing
Subservicer, as the case may be, or for any breach by either the outgoing
Subservicer of any of its representations and warranties contained herein or in
any related document or agreement.
(b) The Servicer, the Subservicer, the Issuer, the Trustee and any
successor Servicer or successor Subservicer shall take such action, consistent
with this Agreement, as shall be necessary to effectuate any such succession.
Upon any succession, such successor Servicer as well as any successor
Subservicer shall notify the Obligors that it has been appointed Servicer or
Subservicer, as the case may be, under this Agreement with respect to the
Contracts.
Section 7.04. Notification to Noteholders. The Subservicer shall promptly
notify the Servicer, the Issuer and the Trustee of any Subservicer Event of
Default upon actual knowledge thereof by the Subservicer. Upon any termination
of, or appointment of a successor to, the Subservicer pursuant to this Article
7, the Trustee shall give prompt written notice thereof to the Noteholders at
their respective addresses appearing in the Note Register.
Section 7.05. Waiver of Past Defaults. The Trustee shall, at the direction
of the Holders of Notes representing more than 66-2/3% in principal amount of
the Notes Outstanding, on behalf of all Noteholders, waive any default by the
Subservicer in the performance of its obligations hereunder and its
consequences, other than a default with respect to required deposits and
payments in accordance with Article 3 or a default of the type set forth in
clause (iv) or (v) of Section 7.02(a) hereof, which waiver shall require the
-28-
<PAGE> 32
consent of each Noteholder. Upon any such waiver of a past default, such default
shall cease to exist, and any Subservicer Event of Default arising therefrom
shall be deemed to have been remedied for every purpose of this Agreement. No
such waiver shall extend to any subsequent or other default or impair any right
consequent thereon except to the extent expressly waived.
Section 7.06. Effects of Termination of Subservicer. (a) Upon the
appointment of a successor Subservicer, the predecessor Subservicer shall remit
any Scheduled Payments and any other payments or proceeds that such predecessor
may receive pursuant to any Contract or otherwise to such successor after such
date of appointment.
(b) After the delivery of a Subservicer Termination Notice, the outgoing
Subservicer shall have no further obligations with respect to the management,
administration, servicing, enforcement, custody or collection of the Contracts,
and the successor Subservicer shall have all of such obligations, except that
the outgoing Subservicer will transmit or cause to be transmitted directly to
such successor Subservicer promptly on receipt and in the same form in which
received, any amounts held by the outgoing Subservicer (properly endorsed where
required for such successor to collect them) received as payments upon or
otherwise in connection with the Contracts.
ARTICLE 8
MISCELLANEOUS PROVISIONS
Section 8.01. Termination of the Servicing Agreement. (a) Absent a
termination pursuant to Section 6.01 or 7.02 hereof, the respective duties and
obligations of the Servicer, the Subservicer, the Issuer and the Trustee created
by this Agreement shall terminate upon the discharge of the Indenture in
accordance with its terms; and the respective duties and obligations of the
Trustee shall terminate with respect to the Trustee in the event the Trustee
resigns or is replaced under Section 7.09 of the Indenture; provided, however,
that no resignation or removal of the Trustee and no appointment of a successor
Trustee shall become effective until the acceptance of appointment by the
successor Trustee under Section 7.10 of the Indenture. Upon the termination of
this Agreement pursuant to this Section 8.01(a), each of the Servicer and the
Subservicer shall pay all monies with respect to the Receivables and Credits
held by the Servicer or the Subservicer, as the case may be, and to which the
Servicer and the Subservicer or the Subservicer, as the case may be, is not
entitled, to the Issuer or upon the Issuer's order. Each of the Servicer's and
Subservicer's indemnification obligations pursuant to Section 5.01 hereof will
survive the termination of this Agreement.
(b) This Agreement shall not be automatically terminated as a result of an
Event of Default under the Indenture or any action taken by the Trustee
thereafter with respect thereto, and any liquidation or preservation of the
Trust Estate by the Trustee thereafter shall be subject to the rights of the
Servicer to service the Receivables and to collect servicing compensation as
provided hereunder.
-29-
<PAGE> 33
Section 8.02. Amendments. (a) This Agreement may be amended from time to
time by the Issuer, the Subservicer and the Servicer, with the consent of the
Trustee, and the Holders of not less than 66-2/3% in principal amount of Notes
outstanding, for the purpose of adding any provisions to or changing in any
manner or eliminating any of the provisions of this Agreement; provided,
however, that no such amendment shall, without the consent of each Noteholder
(i) alter the priorities with which any allocation of funds shall be made under
this Agreement; (ii) permit the creation of any lien on the Trust Estate (other
than the lien of the Indenture) or any portion thereof or deprive any such
Noteholder of the benefit of this Agreement with respect to the Trust Estate or
any portion thereof; (iii) modify any provision herein relating to the voting
percentage of Noteholders necessary to grant consent or give direction, or (iv)
modify this Section 8.02 or Sections 6.02 or 6.04 hereof.
(b) Promptly after the execution of any amendment, the Servicer shall send
to the Subservicer, the Trustee, the Rating Agency and each Holder of the Notes
a conformed copy of each such amendment.
(c) It shall be necessary, in any consent of Noteholders under this
Section 8.02, to approve the particular form of any proposed amendment. The
manner of obtaining such consent and of evidencing the authorization of the
execution thereof by Noteholders shall be subject to such reasonable regulations
as the Trustee may prescribe.
(d) Any amendment or modification effected contrary to the provisions of
this Section 8.02 shall be void.
Section 8.03. Governing Law. This Agreement shall be construed in accordance
with the internal laws of the State of New York without regard to conflict of
laws principles and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws.
Section 8.04. Notices, etc., to Trustee, Issuer, Servicer and Subservicer.
Any request, demand, authorization, direction, notice, consent, waiver or Act of
Noteholders or other document provided or permitted by this Agreement to be made
upon, given or furnished to, or filed with any party hereto shall be sufficient
for every purpose hereunder if in writing and telecopied or mailed, first-class
postage prepaid and addressed to the appropriate address below:
(a) to the Trustee at 135 South LaSalle Street, Suite 1740, Chicago,
Illinois 60603 (facsimile number (312) 904-2084), Attention: Asset Backed
Securities Trust Services, TRI Funding 1996-1, or at any other address
previously furnished in writing to the Issuer, the Noteholders, the
Servicer and the Subservicer; or
(b) to the Issuer at TRI Funding Company I, 3250 Lakeport Boulevard,
Klamath Falls, Oregon 97601 (facsimile number (503) 885-7454), Attention:
Treasurer, or at any other address previously furnished in writing to the
Trustee, the Noteholders, the Servicer and the Subservicer by the Issuer;
or
-30-
<PAGE> 34
(c) to the Servicer at Trendwest Resorts, Inc., 12301 N.E. 10th
Place, Bellevue, Washington 98005 (facsimile number (206) 990-2305),
Attention: Executive Vice President, or at any other address
previously furnished in writing to the Trustee, the Noteholders, the
Subservicer and the Issuer; or
(d) to the Subservicer at Sage Systems, Inc., 2135 112th Avenue
N.E., Suite 101, Bellevue, Washington 98004 (facsimile number (206)
462-0264), Attention: President, or at any other address previously
furnished in writing to the Trustee, the Noteholders and the Servicer; or
(e) to the Rating Agency at Fitch Investors Service, L.P., One State
Street Plaza, New York, New York 10004 (facsimile (212) 480-4438),
Attention: Kenneth Rosenberg or at any other address previously furnished
in writing to the Trustee, the Noteholders, the Subservicer, the Servicer
and the Issuer.
Section 8.05. Notices and Other Documents to Noteholders; Waiver. (a) Where
this Agreement provides for notice to Noteholders of any event, such notice
shall be in writing and sent (i) by telefacsimile if the sender on the same day
sends a confirming copy of such notice by a recognized overnight delivery
service (charges prepaid), or (ii) by registered or certified mail with return
receipt requested (postage prepaid), or (iii) by a recognized overnight delivery
service (with charges prepaid). Any such notice to a Noteholder or its nominee
must be sent to (i) such Person at the address specified for such communications
in the Note Register, or at such other address as the Noteholder shall have
specified to the Trustee in writing and (ii) if specified, to such other Person
as shall be identified in writing to the Trustee by each Noteholder or its
nominee. The Trustee acknowledges receipt of Annex 1 to the Note Purchase
Agreement, which sets forth such information with respect to the initial
Holders. Notice under this Section 8.05 will be deemed to be given only when
actually received.
(b) Where this Agreement provides for notice in any manner, such notice
may be waived in writing by any Person entitled to receive such notice, either
before or after the event, and such waiver shall be the equivalent of such
notice. Waivers of notice by Noteholders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
(c) Any reports, documents or other communications other than notices to
be sent to Noteholders may be telecopied or mailed, first class postage prepaid
and shall be addressed to the Noteholders and their nominees and designees, if
applicable, as set forth in paragraph (a) above.
Section 8.06. Severability of Provisions. If one or more of the provisions
of this Agreement shall be for any reason whatever held invalid, such provisions
shall be deemed severable from the remaining covenants and provisions of this
Agreement, and shall in no way affect the validity or enforceability of such
remaining provisions, the rights of any parties hereto, or the rights of the
Trustee or any Noteholder. To the extent permitted by
-31-
<PAGE> 35
law, the parties hereto waive any provision of law which renders any provision
of this Agreement prohibited or unenforceable in any respect.
Section 8.07. Binding Effect. All provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the parties hereto, and all such provisions shall inure to the benefit of the
Noteholders. This Agreement may not be modified except by a writing signed by
all parties hereto.
Section 8.08. Article Headings and Captions. The article headings and
captions in this Agreement are for convenience of reference only, and shall not
limit or otherwise affect the meaning hereof.
Section 8.09. Legal Holidays. In the case where the date on which any action
required to be taken, document required to be delivered or payment required to
be made is not a Business Day, such action, delivery or payment need not be made
on such date, but may be made on the next succeeding Business Day.
Section 8.10. Assignment for Security for the Notes. The Servicer
understands that the Issuer will assign to and grant to the Trustee a security
interest in all of its right, title and interest to this Agreement. The Servicer
consents to such assignment and grant and further agree that all
representations, warranties, covenants and agreements of the Servicer made
herein shall also be for the benefit of and inure to the Trustee and all Holders
from time to time of the Notes.
Section 8.11. No Servicing Assignment. Notwithstanding anything to the
contrary contained herein, except as provided in Sections 5.02 and 5.04 hereof,
this Agreement may not be assigned by the Issuer, the Seller, the Subservicer or
the Servicer (except with respect to the appointment of a subservicer) without
the prior written consent of the Holders of Notes representing not less than
66-2/3% in principal amount of the Notes Outstanding.
Section 8.12. Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one original
document.
-32-
<PAGE> 36
IN WITNESS WHEREOF, the Issuer, the Servicer, the Subservicer and the
Trustee have caused this Agreement to be duly executed by their respective
officers or authorized signatories thereunto duly authorized as of the date and
year first above written.
TRI FUNDING COMPANY I, L.L.C., as Issuer
By: TRENDWEST FUNDING I, INC., Member
By______________________________________
Name:
Title:
TRENDWEST RESORTS, INC., as Servicer
By______________________________________
Name:
Title:
SAGE SYSTEMS, INC., as Subservicer
By______________________________________
Name:
Title:
LASALLE NATIONAL BANK, as Trustee
By______________________________________
Name:
Title:
-33-
<PAGE> 37
EXHIBIT A
FORM OF
MONTHLY SERVICER'S REPORT
<PAGE> 1
Chapman and Cutler
Draft of April 16, 1996
PURCHASE AND SALE AGREEMENT
between
TRENDWEST FUNDING I, INC.
("TFI")
and
TWH FUNDING I, INC.
("SPC")
and
TRENDWEST RESORTS, INC.
("TRENDWEST")
and
TRI FUNDING COMPANY I, L.L.C.
("Issuer")
Dated as of March 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS.......................................................................................... 2
Section 1.01. Defined Terms.................................................................................... 2
ARTICLE 2 ACQUISITION OF PURCHASED ASSETS...................................................................... 3
Section 2.01. Purchase Asset Acquisition....................................................................... 3
Section 2.02. Grant of Security Interest....................................................................... 3
Section 2.03. Purchased Asset Price............................................................................ 4
Section 2.04. Delivery of Contracts; Filing of Financing Statements............................................ 4
Section 2.05. Servicing of Contracts and Credits............................................................... 4
Section 2.06. Review of Contracts.............................................................................. 4
ARTICLE 3 REPRESENTATIONS AND WARRANTEES....................................................................... 5
Section 3.01. Representations and Warranties of the Sellers.................................................... 5
Section 3.02. Representations and Warranties of the Issuer..................................................... 12
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties................................................................... 13
Section 3.04. Requirements for Purchase or Substitution of Receivables; Upgrades............................... 14
ARTICLE 4 COVENANTS............................................................................................ 16
Section 4.01. Seller and Trendwest Covenants................................................................... 16
Section 4.02. Issuer Covenants................................................................................. 20
Section 4.03. Assignment of Purchased Assets................................................................... 21
ARTICLE 5 CONDITIONS PRECEDENT................................................................................. 21
Section 5.01. Conditions to the Issuer's Initial Obligations................................................... 21
Section 5.02. Conditions to the Sellers' Obligations........................................................... 22
ARTICLE 6 TERM AND TERMINATION................................................................................. 23
Section 6.01. Term............................................................................................. 23
Section 6.02. Default by the Sellers or Trendwest.............................................................. 23
ARTICLE 7 MISCELLANEOUS........................................................................................ 23
Section 7.01. Amendments....................................................................................... 23
Section 7.02. Governing Law.................................................................................... 23
Section 7.03. Notices.......................................................................................... 23
Section 7.04. Separability Clause.............................................................................. 23
Section 7.05. Assignment....................................................................................... 24
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 7.06. Further Assurances............................................................................... 24
Section 7.07. No Waivers; Cumulative Remedies.................................................................. 24
Section 7.08. Binding Effect; Third Party Beneficiaries........................................................ 24
Section 7.09. Set-Off.......................................................................................... 24
Section 7.10. Counterparts..................................................................................... 24
</TABLE>
ANNEX A -- FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
EXHIBIT A -- FORM OF CONTRACT
EXHIBIT B -- FORM OF ASSIGNMENT
EXHIBIT C -- FORM OF SUBORDINATED NOTE
-ii-
<PAGE> 4
THIS PURCHASE AND SALE AGREEMENT, dated as of March 1, 1996 (this
"Agreement"), by and among Trendwest Funding, Inc., a Delaware corporation
(herein, together with its permitted successors and assigns, "TFI"), TWH Funding
I, Inc., a Delaware corporation (herein, together with its permitted successors
and assigns, "SPC" and, together with TFI, the "Sellers"), Trendwest Resorts,
Inc., an Oregon corporation (herein, together with its permitted successors and
assigns, "Trendwest") and TRI Funding Company I, L.L.C., a Delaware limited
liability company (herein, together with its permitted successors and assigns,
the "Issuer").
PRELIMINARY STATEMENT
The Issuer has entered into an Indenture, dated as of March 1, 1996 (as
amended and supplemented from time to time, the "Indenture"), with LaSalle
National Bank, as trustee (herein, together with its permitted successors and
assigns, the "Trustee"), and Trendwest, as servicer (herein, together with its
permitted successors and assigns, the "Servicer"), pursuant to which the Issuer
intends to issue its Notes (collectively, the "Notes") as provided in the
Indenture.
In furtherance thereof, the Issuer, Trendwest, and the Sellers have
entered into this Agreement to provide for, among other things, the purchase by
the Issuer of all of the right, title and interest in and to the Purchased
Assets and a security interest in the Credits, which the Issuer is pledging with
the Trustee, and in which the Issuer will be granting to the Trustee a security
interest, as security for the Notes. As a precondition to the effectiveness of
this Agreement, the Issuer, the Trustee, the Subservicer and the Servicer will
enter into the Servicing Agreement, dated as of March 1, 1996 (as amended and
supplemented from time to time, the "Servicing Agreement"), to provide for the
administration and servicing of the Purchased Assets. In connection with the
issuance of the Notes and pursuant to this Agreement, the Sellers will sell the
Purchased Assets to the Issuer. The initial sale shall be effected by this
Agreement and an Assignment from the Seller to the Issuer, and the list of
Contracts relating to the Purchased Assets so conveyed shall be listed on
Schedule I to such Assignment.
In order to further secure the Notes, the Issuer is granting to the
Trustee a security interest in, among other things, the Issuer's rights derived
under this Agreement and the Servicing Agreement, and the Sellers agree that all
covenants and agreements made by it in this Agreement with respect to the
Purchased Assets shall also be for the benefit and security of the Trustee and
all holders from time to time of the Notes. In consideration for the Purchased
Assets and its representations, warranties, covenants and other agreements under
this Agreement, the Sellers will receive payment from the Issuer of all of the
proceeds of the issuance of the Notes on the Closing Date and TFI will receive
the Subordinated Note and a membership interest in the Issuer.
<PAGE> 5
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. For purposes of this Agreement the
following terms shall have the meanings specified herein. Capitalized terms used
herein but not otherwise defined shall have the respective meanings assigned to
such terms in the Indenture.
"Assignment" shall mean the Assignment, substantially in the form
attached hereto as Exhibit B, which shall be entered into in connection with the
conveyance of the Purchased Assets from the Sellers to the Issuer on the Closing
Date.
"Contract File" shall mean, with respect to each Contract, the
following documents:
(i) a copy of the Contract;
(ii) notice of assignment; and
(iii) any other documents or papers relating to
servicing the Receivables.
"Custodian" shall mean Sage Systems, Inc. and its permitted successors
and assigns.
"Custodian File" shall mean, with respect to each Contract, the
following documents:
(i) the original Contract; and
(ii) notice of assignment.
"Cut-Off Date" shall having the meaning set forth in the Indenture.
"Issuer Address" shall mean 3250 Lakeport Boulevard, Klamath Falls,
Oregon 97601.
"Electronic Ledgers" shall mean the electronic master records of all
contracts of the Issuer or the Servicer similar to and including the Contracts.
"Eligible Contract" shall mean a Contract that satisfies the selection
criteria set forth in Section 3.01(a) hereof and which is aged at least four
months, provided that with respect to any Substitute Contract, any reference in
such Section to Cut-Off Date shall be deemed to refer to the date as of which
the Substitute Receivable is conveyed to the Issuer in accordance with Section
3.04 hereof.
"Indenture" shall mean the Indenture, dated as of March 1, 1996, by and
among the Issuer, the Trustee and the Servicer, as amended and supplemented from
time to time.
-2-
<PAGE> 6
"Purchased Asset Price" shall mean an amount equal to the aggregate
principal amount outstanding on the Contracts as of the Cut-Off Date plus
accrued interest through the Closing Date.
"Purchased Assets" shall mean all of the Sellers' right, title and
interest in and to (a) the Contracts and the related Receivables, including the
proceeds of the Contracts and the related Receivables and all payments received
on or with respect to the Contracts and the related Receivables and due after
the Cut-Off Date, (b) the Contract Files and the Custodian Files, (c) the
Sellers' rights and interests in the related Credits, (d) the Servicing Charges
with respect to the Contracts, (e) all rights and interests of TFI under the
Receivables Purchase Agreement, and (f) all income and proceeds of the foregoing
or relating thereto.
"Seller Address" shall mean 12301 N.E. 10th Place, Bellevue, Washington
98005.
"Substitute Contract" shall have the meaning set forth in Section
3.04(b) hereof.
"Substitute Receivable" shall mean the Receivable related to a
Substitute Contract.
"Substitution Criterion" shall have the meaning set forth in Section
3.04(b) hereof.
"Substitution Date" shall mean the date a Contract is purchased or
substituted pursuant to Section 3.03 hereof; such date shall occur on the 25th
of each month or on the next Business Day if the 25th is not a Business Day.
"TFI Contracts" shall mean Contracts which are sold to the Issuer under
this Agreement by TFI.
"Upgrade" shall have the meaning set forth in the Indenture.
"Upgrade Contract" shall have the meaning set forth in the Indenture.
ARTICLE 2
ACQUISITION OF PURCHASED ASSETS
Section 2.01. Purchase Asset Acquisition. In return for the
Purchased Asset Price and other rights created by this Agreement, the Sellers
hereby transfer, assign, sell, and grant, without recourse except as provided in
Section 3.03 of this Agreement, on the Closing Date any and all of the Sellers'
respective right, title and interest in and to all of the Purchased Assets
relating to the Contracts set forth on Schedule I to the Assignment. The Sellers
hereby acknowledge that the transfer of the Purchased Assets to the Issuer is
absolute and irrevocable, without reservation or retention of any interest
whatsoever by the Sellers.
Section 2.02. Grant of Security Interest. Each of the Sellers hereby
pledge, grant and assign to the Issuer its interest in the security interest in
the related Credits to secure the Sellers' performance of its obligations
hereunder and the payment of the obligations of the
-3-
<PAGE> 7
Obligors under each Contract, and this Agreement shall constitute a security
agreement for such purpose under applicable law.
Section 2.03. Purchased Asset Price. By the execution of the
Assignment, subject to all the terms and conditions of this Agreement and in
reliance upon the representations, warranties and covenants set forth in this
Agreement, on the Closing Date, the Issuer hereby agrees to pay the Purchased
Asset Price simultaneously with the issuance of the Notes, in the case of the
Closing Date. The Purchased Asset Price shall be paid in the form of cash or in
such other form as the Sellers and the Issuer may agree.
Section 2.04. Delivery of Contracts; Filing of Financing Statements.
(a) In connection with the Issuer's acquisition of the Purchased Assets, the
Sellers, on behalf of the Issuer, shall deliver, or cause the delivery of, the
original Contracts to the Custodian so that the Custodian may retain possession
thereof as provided in the Transaction Documents. In addition, the Sellers agree
to execute and Trendwest agrees to record and file prior to the Closing Date, at
its own expense, financing statements (and thereafter timely continuation
statements with respect to such financing statements) with respect to the
applicable Purchased Assets, in accordance with Section 3.01(a)(viii) and
Section 4.01(c) hereof.
(b) In connection with each such acquisition, Trendwest shall
promptly, at its own expense, cause any Electronic Ledger maintained by it or
either of the Sellers to be marked to show which Purchased Assets have been
acquired by the Issuer in accordance with this Agreement and pledged by the
Issuer to the Trustee in accordance with the Transaction Documents.
(c) It is the intention of the Sellers and the Issuer that the Issuer
is acquiring full and absolute title to the Purchased Assets. If it is
determined, however, that the Sellers have transferred to the Issuer a security
interest in the Purchased Assets, then this Agreement shall constitute a
security agreement under applicable law, and the Sellers do hereby pledge, grant
and assign to the Issuer a security interest in the Purchased Assets.
Section 2.05. Servicing of Contracts and Credits. The Servicer shall
service the Contracts, the related Credits and the other Purchased Assets for
the benefit of the Issuer (and its successors and assigns) in accordance with
the terms and conditions of the Transaction Documents. Notwithstanding the
foregoing, Trendwest acknowledges and agrees that its obligations under this
Agreement are independent of any obligations it may have under the other
Transaction Documents and that its obligations under this Agreement will
continue in full force and effect until termination of this Agreement in
accordance with Section 6.01 hereof, unless otherwise provided herein.
Section 2.06. Review of Contracts. If either of Trendwest or the
Custodian (who shall thereupon notify Trendwest and the Trustee) discovers that
any Contracts are missing or defective (that is, mutilated, damaged, defaced,
incomplete, improperly dated, clearly forged or otherwise physically altered) in
any material respect, Trendwest shall correct or cure such omission, defect or
other irregularity within 30 days from the date Trendwest discovered such
omission or defect, or from the date Trendwest is notified by the Custodian
-4-
<PAGE> 8
of such omission or defect. In the event Trendwest is unable to correct or cure
such omission, defect or irregularity within the 30 day period described in the
preceding sentence, Trendwest shall purchase or replace such Receivable from the
Issuer in accordance with Section 3.03 hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTEES
Section 3.01. Representations and Warranties of the Sellers. Each
Seller, with respect to itself and the Contracts, Receivables and interest in
the related Credits sold by such Seller, and Trendwest, with respect to all
Contracts, Receivables, the related Credits, and both Sellers, hereby make the
following representations and warranties to the Issuer for the benefit of the
Trustee and Holders of the Notes, on which the Issuer relies in acquiring the
Purchased Assets and on which the Holders of the Notes rely in purchasing the
Notes. Such representations and warranties shall survive any subsequent
transfer, assignment, contribution or conveyance of the Receivables and the
security interest in the related Credits and any issuance of Notes.
(a) As to each Contract, as of the Closing Date:
(i) The information set forth in the Contract
Schedule is true and correct as of the Cut-Off Date.
(ii) The rights with respect to the Contract are
assignable by the lender thereunder and its successors and
assigns without the consent of any Person.
(iii) Trendwest or the applicable Seller has
heretofore provided to the Custodian the sole original
counterpart of the Contract, together with any amendments,
waivers and modifications thereto, except original executed
counterparts which have been marked to show that they have
been pledged by the Issuer to the Trustee under the Indenture,
and the terms of such Contract have not been amended, waived
or modified subsequent to the above being provided to the
Custodian.
(iv) The Electronic Ledgers have been marked as
provided in Section 2.04(b) hereof.
(v) The Contract was not originated in, nor is it
subject to the laws of, any jurisdiction, the laws of which
would make unlawful the sale, transfer or assignment of such
document under any of the Transaction Documents, including any
repurchase in accordance with the Transaction Documents.
(vi) The Contract is in full force and effect in
accordance with its respective terms, and none of Trendwest or
either Seller or any Obligor has or will have suspended or
reduced any payments or obligations due or to become
-5-
<PAGE> 9
due thereunder by reason of a default by the other party to
such Contract; as of the Closing Date, no Scheduled Payment
with respect to such Contract has not been received and
remains unpaid for a period of 30 or more days (without regard
to advances, if any, made by the Servicer), and there are no
proceedings pending, or to the best of the knowledge of
Trendwest or either Seller, threatened asserting insolvency of
such Obligor; there has been no other default, breach or
violation and no event, other than relating to an Upgrade,
permitting acceleration under such Contract; there are no
proceedings pending, or to the best of the knowledge of
Trendwest or either Seller, threatened, wherein such Obligor
or any governmental agency has alleged that such Contract is
illegal or unenforceable; and none of the related Scheduled
Payments are subject to any set-off or credit of any kind.
(vii) The Contract is the valid, binding and legally
enforceable obligation of the parties thereto, enforceable in
accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of
equity regardless of whether enforcement is sought in a court
of law or equity.
(viii) All actions, filings (including UCC filings) and
recordings as are required by the Indenture and that may be
necessary to perfect a security interest of the Issuer and the
Trustee in, and the sale by Trendwest and TW Holdings to TFI
and the sale from TFI and SPC to the Issuer of, the Contract
and the related Receivables being acquired and the granting of
a security interest in the security interest in the related
Credits hereunder have been accomplished and are in full force
and effect.
(ix) The Contract is identical to one of the form
contracts attached as Exhibit A hereto, except for either (i)
such immaterial modifications or deviations from the form
contract which appear in such Contract, which immaterial
modifications or deviations will not have a material adverse
effect on the Holders of the Notes or (ii) such modifications
or deviations as set forth on Schedule I to the Assignment
related to such Contract.
(x) The Contract was originated by Trendwest in
Trendwest's ordinary course of business and meets Trendwest's
qualifications for originating vacation credit installment
contracts. The origination and collection practices used by
Trendwest and the applicable Seller with respect to such
Contract have been in all respects legal, proper, prudent and
customary in the vacation credit financing and servicing
business.
(xi) The Receivable is under a Contract that has a
term to the last Scheduled Payment Date of not more than 84
months and not less than one month.
-6-
<PAGE> 10
(xii) The Contract obligates the related Obligor to
make all Scheduled Payments thereunder in full notwithstanding
the collection by Trendwest of a security deposit with respect
thereto. The calculation of the Collateral Value of the
related Receivable does not include any security deposits or
similar payments collected by or on behalf of Trendwest which
are applied to Scheduled Payments.
(xiii) All requirements of applicable federal, State
and local laws, and regulations thereunder, including, without
limitation, usury laws, if any, in respect of the Contract
have been complied with in all material respects, and such
Contract complied in all material respects at the time it was
originated or made and now complies in all material respects
with all legal requirements of the jurisdiction in which it
was originated.
(xiv) The Contract is not and will not be subject to
any right of rescission, set-off, counterclaim or defense,
including the defense of usury, whether arising out of
transactions concerning such Contract or otherwise, and the
operation of any of the terms of such Contract or the exercise
by the applicable Seller or the Obligor of any right under
such Contract will not render such Contract unenforceable in
whole or in part, and no such right of rescission, set-off,
counterclaim or defense has been asserted with respect
thereto, except that certain rights or defenses may exist
under applicable law which, individually or in the aggregate,
do not make the remedies available to the applicable Seller
with respect to such Contract inadequate for the practical
realization of the benefits provided thereby.
(xv) Each of the Sellers and Trendwest has duly
fulfilled all obligations on the lender's part to be fulfilled
under or in connection with the Contract, including, without
limitation, giving any notices or consents necessary to effect
the acquisition of the Purchased Assets by the Issuer and has
done nothing to impair the rights of the Issuer and the
Noteholders in such Contract or payments with respect thereto.
(xvi) The Contract and the related Seller's interest
in the related Credits have not been sold, transferred,
assigned or pledged by the Seller to any Person other than the
Issuer (except for such interests in the Purchased Assets
which shall be terminated on or prior to the Closing Date),
and upon execution and delivery hereof and of the Assignment
by the related Seller and the payment by the Issuer of the
related Purchased Asset Price, the Issuer will have all of the
right, title and interest in and to such Seller's interest in
the Contract related Receivable and a security interest in the
related Credits, free and clear of all liens and encumbrances,
except for the interests of the Obligor pursuant to such
Contract. Such Contract has not been satisfied, subordinated
or rescinded.
-7-
<PAGE> 11
(xvii) Neither the relevant Seller nor Trendwest has
any specific knowledge that the Contract will not be fully
performed in accordance with its terms.
(xviii) The Obligor has made the first Scheduled
Payment (which payment may be an advance payment under such
Contract) due under the Contract within the time set forth in
such Contract.
(xix) The related Obligor is located in the United
States of America or Canada, and the related Scheduled
Payments are payable in U.S. dollars.
(xx) Except for changes due to Upgrades, the related
Scheduled Payments were established at the time such Contract
was originated.
(xxi) There are no unpaid brokerage or other fees
owed to third parties relating to the origination of the
Contract.
(xxii) The Contract cannot be rescinded pursuant to
applicable consumer finance laws.
(xxiii) The contract was originated in compliance
with the requirements of all federal, state and local laws,
rules and regulations applicable to the origination of the
Contract (including, without limitation, the Federal
Truth-in-Lending Act, the Equal Credit Opportunity Act, the
Fair Credit Billing Act, the Fair Credit Reporting Act, the
Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal
Reserve Board's Regulations "B" and "Z", the Soldiers' and
Sailors' Civil Relief Act of 1940, and any other federal,
state and local laws relating to interest, usury, consumer
credit, equal credit opportunity, fair credit reporting,
privacy, consumer protection, false or deceptive trade
practices and disclosure, the Mail Fraud statute and any
timeshare disclosure), non-compliance with which could have a
material adverse effect on the enforceability or value of the
Contract.
(xxiv) All Scheduled Payments are due and payable
monthly and such Scheduled Payments are level payments
throughout the terms of the Contracts.
(b) As to the aggregate pool of Contracts as of the Closing
Date neither Trendwest nor either Seller used any selection procedures
that identified the Contracts as being less desirable or valuable than
other comparable vacation credit installment contracts originated by
Trendwest.
(c) As to each Seller as of the Closing Date:
(i) Each Seller has been duly organized and is
validly existing and in good standing as a corporation under
the laws of the State of Delaware with corporate power and
authority to own its properties and to transact the business
-8-
<PAGE> 12
in which it is now engaged, and each Seller is duly qualified
to do business in and is in good standing under the laws of
each State in which its business is located or is not required
under applicable law to effect such qualification, except
where failure to so qualify would not have a material adverse
effect on the ability of such Seller to perform its
obligations under the Transaction Documents or on any of the
Contracts, the Receivables or the Credits or on the ability of
the Seller, the Issuer or the Trustee to realize upon or
enforce the same.
(ii) The performance of the obligations of each
Seller under this Agreement and the other Transaction
Documents and the consummation of the transactions herein and
therein contemplated will not conflict with or result in any
breach of any of the terms or provisions of, or constitute
with or without notice, lapse of time or both, a default under
the Certificate of Incorporation or Bylaws of such Seller, or
any material indenture, agreement, mortgage, deed of trust or
other instrument to which such Seller is a party or by which
it is bound, or result in the creation or imposition of any
lien, charge or encumbrance (except the lien created by the
Transaction Documents) upon any of the property or assets of
such Seller pursuant to the terms of such indenture, mortgage,
deed of trust, or other agreement or instrument to which such
Seller is a party or by which such Seller is bound or to which
any of such Seller's property or assets is subject, nor will
such action result in any violation of the provisions of the
Seller's Certificate of Incorporation or By-laws or any
statute or any order, rule or regulation of any court or any
regulatory authority or other governmental agency or body
having jurisdiction over such Seller or any of its properties;
and no consent, approval, authorization, order, registration
or qualification of or with or other action of any court, or
any such regulatory authority or other governmental agency or
body is required for consummation of the transactions
contemplated by this Agreement and the other Transaction
Documents except such consents, approvals and authorizations
which have been obtained or such registrations or
qualifications which have been made.
(iii) This Agreement and any other Transaction
Document to which the Seller is a party have been duly
authorized, executed and delivered by each Seller by all
necessary corporate action and such agreements are the valid
and legally binding obligations of such Seller, enforceable
against such Seller in accordance with their respective terms,
subject as to enforcement to applicable bankruptcy,
insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of
whether enforcement is sought in a court of law or equity.
(iv) Each Seller Address is the chief executive
office, principal place of business and the office where such
Seller keeps its records concerning the Contracts, Receivables
and the related Credits. Such Seller has not used any address
other than its Seller Address in the previous five-year
period. Such
-9-
<PAGE> 13
Seller's legal name is as set forth in this Agreement. Such
Seller has not used or done business under any other name in
the previous six-year period.
(v) Each Seller does not believe, nor does it have
any reasonable cause to believe, that it cannot perform each
and every covenant contained in this Agreement.
(vi) The transactions contemplated by the Transaction
Documents are being consummated by each Seller in furtherance
of its ordinary business purposes, with no contemplation of
insolvency and with no intent to hinder, delay or defraud any
of its present or future creditors.
(vii) The consideration received by each Seller
pursuant to this Agreement is fair consideration having value
reasonably equivalent to or in excess of the value of the
performance of each Seller's obligations hereunder.
(viii) Neither on the date of the transactions
contemplated by the Transaction Documents or immediately
before or after such transactions, nor as a result of the
transactions, will either Seller:
(A) be insolvent such that the sum of its
debts is greater than all of its respective property,
at a fair valuation;
(B) be engaged in, or about to engage in,
business or a transaction for which any property
remaining with such Seller will be an unreasonably
small capital or the remaining assets of such Seller
will be unreasonably small in relation to its
respective business or the transaction; and
(C) have intended to incur, or believed it
would incur, debts that would be beyond its
respective ability to pay as such debts mature or
become due. Such Seller's assets and cash flow enable
it to meet its present obligations in the ordinary
course of business as they become due.
(ix) Both immediately before and after the
transactions contemplated by the Transaction Documents (a) the
present fair salable value of each Seller's assets was or will
be in excess of the amount that will be required to pay its
probable liabilities as they then exist and as they become
absolute and matured; and (b) the sum of such Seller's assets
was or will be greater than the sum of its debts, valuing its
assets at a fair salable value.
(x) The acquisition of the Purchased Assets by the
Issuer pursuant to this Agreement is not subject to the bulk
transfer or any similar statutory provisions in effect in any
applicable jurisdiction.
-10-
<PAGE> 14
(xi) There are no proceedings or investigations
pending or, to the knowledge of each Seller or Trendwest,
threatened against or affecting such Seller in or before any
court, governmental authority or agency or arbitration board
or tribunal which, individually or in the aggregate, involve
the possibility of materially and adversely affecting the
properties, business, prospects, profits or condition
(financial or otherwise) of such Seller, or the ability of
such Seller to perform its obligations under this Agreement or
the other Transaction Documents. Such Seller is not in default
with respect to any order of any court, governmental authority
or agency or arbitration board or tribunal.
(xii) All tax returns or extensions required to be
filed by each Seller in any jurisdiction have in fact been
filed, and all taxes, assessments, fees and other governmental
charges upon such Seller, or upon any of the respective
properties, income or franchises shown to be due and payable
on such returns have been, or will be, paid. All such tax
returns are true and correct, and such Seller has no knowledge
of any proposed additional tax assessment against it in any
material amount nor of any basis therefor. The provisions for
taxes on the books of such Seller are in accordance with
generally accepted accounting principles.
(xiii) Neither Seller (i) is in violation of any laws,
ordinances, governmental rules or regulations to which it is
subject, (ii) has failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to
the ownership of its property or to the conduct of its
business, and (iii) is in violation in any material respect of
any term of any agreement, charter instrument, bylaw or
instrument to which it is a party or by which it may be bound
which violation or failure to obtain might materially
adversely affect the business or condition (financial or
otherwise) of such Seller.
(xiv) It is the intention of each Seller that the
Purchased Assets are being or have been acquired by the Issuer
and that the beneficial interest in and title to the Purchased
Assets are not part of such Seller's estate in the event of
the filing of a bankruptcy petition by or against such Seller
under any bankruptcy law.
(xv) Immediately prior to the acquisition of the
Purchased Assets by the Issuer pursuant to this Agreement, the
Seller was the sole owner of such Purchased Assets at such
time and had a valid security interest (or a security interest
in a security interest) in the related Credits, and had good
and marketable title to such Purchased Assets, free and clear
of all liens, claims and encumbrances (except for the
Purchased Asset Price and security interests in the Purchased
Assets which shall be terminated on or prior to the Closing
Date); and the acquisition of the Purchased Assets by the
Issuer does not violate the terms or provisions of any
Contract.
(xvi) Each Seller will treat the transfer of the
Purchased Assets as a sale to the Issuer for federal, State
and local income tax reporting and accounting
-11-
<PAGE> 15
purposes. The affiliated group of which such Seller is a
member within the meaning of Section 1504 of the Code shall
treat the Purchased Assets as owned by the Issuer for federal,
state and local income tax purposes.
(xvii) The transfer of the Purchased Assets pursuant
to this Agreement constitutes the valid transfer by each
Seller to the Issuer of all of such Seller's right, title and
interest in the Purchased Assets.
(xviii) Each Seller has valid business reasons for
selling the Purchased Assets to the Issuer pursuant to this
Agreement rather than obtaining a loan secured by the
Purchased Assets.
(xix) Each Seller will be operated generally so as to
not be substantively consolidated with the Issuer.
(xx) No event has occurred that adversely affects the
Seller's ability to perform the transactions contemplated by
the Transaction Documents.
(xxi) Each pension plan or profit sharing plan to
which either Seller is a party has been fully funded in
accordance with the obligations of such Seller as set forth in
such plan.
(xxii) Neither the acquisition nor the holding of the
Contracts and the related Receivables violates any federal or
State law, rule or regulation the non-compliance with which
could have a material adverse effect on the value of the
Contracts or the related Receivables.
Section 3.02. Representations and Warranties of the Issuer. The
Issuer hereby makes the following representations and warranties for the benefit
of the Trustee and Holders of the Notes, on which the Seller relies in entering
into this Agreement with the Issuer and on which the Holders of the Notes rely
in purchasing the Notes; such representations and warranties speak as of the
Closing Date unless otherwise indicated, but shall survive any subsequent
transfer, assignment, contribution or conveyance of the Purchased Assets:
(a) The Issuer has been duly organized and is validly
existing in good standing as a limited liability company under the laws
of the State of Delaware, with power and authority to own its
properties, perform its obligations under the Transaction Documents and
to transact the business in which it is now engaged or in which it
proposes to engage; the Issuer is duly qualified to do business and is
in good standing in each State in which the nature of its business
requires it to be so qualified, except where failure to so qualify
would not have a material adverse effect on the ability of the Issuer
to perform its obligations under the Transaction Documents.
(b) The transfer to and receipt by the Issuer of each Seller's
interest in the Receivables and a security interest in the related
Credits pursuant to this Agreement and the consummation of the
transactions contemplated herein and in the Transaction
-12-
<PAGE> 16
Documents will not conflict with or result in breach of any of the
terms or provisions of, or constitute (with or without notice, lapse of
time or both) a default under the Certificate of Formation or the
Limited Liability Company Agreement of the Issuer or any material
indenture, agreement, mortgage, deed of trust or other instrument to
which the Issuer is a party or by which it is bound, or result in the
creation or imposition of any lien, charge or encumbrance (except for
the lien created by this Agreement and the Indenture) upon any of the
property or assets of the Issuer pursuant to the terms of, such
indenture, mortgage, deed of trust, or other agreement or instrument to
which the Issuer is a party or by which it is bound or to which any of
the property or assets of the Issuer is subject, nor will such action
result in any violation of the provisions of the Certificate of
Formation or the Limited Liability Company Agreement of the Issuer or
any statute or any order, rule or regulation of any court or regulatory
authority or other governmental agency or body having jurisdiction over
the Issuer or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with or other
action of any court or any such regulatory authority or other
governmental agency or body is required for the acquisition of the
Purchased Assets hereunder.
(c) The Transaction Documents have been duly authorized,
executed and delivered by the Issuer by all necessary action and
constitute valid and legally binding obligations of the Issuer
enforceable against the Issuer in accordance with their terms, subject
as to enforcement to bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a court of equity or
law.
(d) There are no proceedings or investigations to which the
Issuer is a party pending or, to the knowledge of the Issuer,
threatened, before any court, regulatory body, administrative agency or
other tribunal or governmental instrumentality (a) asserting the
invalidity of this Agreement, (b) seeking to prevent the issuance of
the Notes or the consummation of any of the transactions contemplated
by this Agreement, or (c) seeking any determination or ruling that
would materially and adversely affect the performance by the Issuer of
its obligations under, or the validity or enforceability of, this
Agreement.
(e) All approvals, authorizations, consents, orders or other
actions of any Person or of any court, governmental agency or body or
official, required in connection with the execution and delivery of
this Agreement, have been or will be taken or obtained on or prior to
the Closing Date.
(f) The Issuer Address is the principal place of business and
chief executive office of the Issuer.
Section 3.03. Purchase or Substitution Required upon Breach of
Certain Representations and Warranties. Upon discovery by either Seller,
Trendwest or the Issuer of the breach of any representations or warranties set
forth in Section 3.01 or 3.02 hereof
-13-
<PAGE> 17
which materially and adversely affects the value of a Contract, Receivable, the
related Credits, or the interests of the Holders of the Notes, or a breach of
any of the representations and warranties set forth in Sections 3.01(a)(v),
3.01(a)(vi), 3.01(a)(vii), 3.01(a)(xiii), 3.01(a)(xiv), 3.01(a)(xvi),
3.01(a)(xxii) or 3.01(a)(xxiii) hereof, the party discovering such breach shall
give prompt written notice to the other parties. TFI, with respect to TFI
Contracts or Trendwest, with respect to all Contracts shall, within 30 days from
the date such Person was notified of, or otherwise discovers, such breach, cure
such breach, or, (1) if the breach relates to a particular Contract and is not
cured, either (a) purchase the Issuer's interest in the related Receivable from
the Issuer at the Purchase Price or (b) provide a Substitute Receivable or (2)
if the breach relates to a representation or warranty regarding the selection
criteria of the Contracts as a whole and is not cured by TFI or Trendwest, as
applicable, either (a) purchase the Issuer's interest in such non-conforming
Contracts and the related Receivables from the Issuer or (b) provide Substitute
Receivables as set forth above, so that the representations and warranties with
respect to the selection criteria are correct, as evidenced by a certificate of
an officer of TFI or Trendwest. as applicable, to the Trustee. The Purchase
Price for a purchased Receivable shall be paid, and any Substitute Contract
shall be delivered, by such Seller or Trendwest to the Issuer in accordance with
Section 3.04(c) hereof. It is understood and agreed that the obligation of TFI
or Trendwest to cure or purchase or replace any Receivable related to a Contract
as to which such a breach has occurred shall constitute the sole remedy
respecting such breach available to the Issuer, the Holders of Notes or the
Trustee on behalf of such Holders (except for any indemnities provided under
Section 4.01(j) hereof or its obligations under the related Indenture) for any
losses, claims, damages and liabilities arising from the Issuer's interest in
such Receivable or the inclusion of the Issuer's interest in such Receivable in
the Trust Estate.
Section 3.04. Requirements for Purchase or Substitution of
Receivables; Upgrades. (a) If either TFI or Trendwest is required to purchase
the Issuer's interest in any Receivable under Section 3.03 hereof or if the
Issuer is required or elects to purchase the Trustee's interest in any
Receivable under Section 3.10 of the Servicing Agreement, such Receivable shall
be purchased by TFI or Trendwest at the Purchase Price. All purchases shall be
accomplished at the times specified in subsection (c) below.
(b) If TFI or Trendwest is required to substitute any Receivable
related to a Contract under Section 3.03 hereof, or if the Issuer is required or
elects to substitute any Receivable related to a Contract under Section 3.10 of
the Servicing Agreement (a "Substitute Contract"), each such Substitute Contract
shall (i) be an Eligible Contract; (ii) be written on one of the standard forms
attached as Exhibit A to this Agreement; (iii) be accompanied by a supplement to
this Agreement substantially in the form of Annex A hereto subjecting such
Contract to the provisions hereof and providing with respect to such Substitute
Contract the information required in the Contract Schedule; (iv) not have been
selected using procedures that identified the Contracts as being less desirable
or valuable than other comparable vacation credit retail installment contracts
originated by Trendwest and (v) not have any Scheduled Payments that are due
after the Stated Maturity Date of the Notes. In addition, (i) such Substitute
Contracts shall have an aggregate Collateral Value at least equal to and not
materially greater than the aggregate
-14-
<PAGE> 18
Collateral Value of the Contracts being withdrawn as of the date of withdrawal
(the "Substitution Criterion") and (ii) the representations and warranties set
forth in Sections 3.01 and 3.02 shall be true and correct with respect to such
Substitute Contract and the aggregate pool of Contracts as of the date the
Substitute Receivable is conveyed to the Issuer.
Upon the substitution of any Substitute Receivable pursuant to the
provisions of this Section 3.04(b), TFI and Trendwest hereby agrees that such
Substitute Receivable will be subject to all the terms and provisions of this
Agreement, the Servicing Agreement, the Custodian Agreement and the Indenture
just as if such Substitute Receivable and the related Substitute Contract had
been one of the original Contracts the related Receivable of which was acquired
on the Closing Date. Upon the substitution of a Substitute Receivable pursuant
to this Section 3.04(b), the Issuer and the related Seller shall also comply
with the provisions and limitations set forth in the Indenture. All
substitutions shall be accomplished at the time specified in subsection (c)
below.
(c) Any purchase or substitution of a Receivable related to a
Contract by the Seller in accordance with Section 3.03 hereof or this Section
3.04 or by the Issuer under Section 3.10 of the Servicing Agreement shall be
made either by remittance of the Purchase Price to the Subservicer for deposit
into the Clearing Account in accordance with Section 3.03(a) of the Servicing
Agreement or by substitution of a Substitute Receivable, as applicable, within
one Business Day following the expiration of the cure period set forth in
Section 3.03 hereof.
(d) Any voluntary purchase or substitution of a Receivable related to
a Contract by the Issuer pursuant to the terms of the Servicing Agreement or
Indenture in the event of a default, delinquency or modification with respect to
such Contract shall satisfy the same requirements for a purchase or
substitution, as the case may be, as are set forth in this Section 3.04.
(e) If an Obligor desires to enter into an Upgrade Contract,
Trendwest, as Servicer, shall inform the Issuer of such fact. In such event, if
the Issuer desires to enter into such Upgrade and so advises Trendwest,
Trendwest for the benefit of the Issuer may (but shall not be obligated to) to
enter into an Upgrade Contract with such Obligor and transfer such Upgrade
Contract to TFI, which shall simultaneously transfer such Upgrade Contract to
the Issuer, in exchange for the existing Contract with such Obligor and an
amount equal to the difference in the principal balance between the existing
Contract and the Upgrade Contract (which amount shall be paid to TFI by
increasing the amount owed by the Issuer under the Subordinated Note); provided,
however, that (i) such Upgrade Contract has an interest rate that is not more
than 1.0% per annum lower than the interest rate on the Contract that is being
replaced, (ii) each Scheduled Payment under the Upgrade Contract shall be the
equal to or greater than the Scheduled Payments on the existing Contract, (iii)
such Obligor has made all Scheduled Payments due on or before the date of such
Upgrade, (iv) such Upgrade Contract is written on one of the standard forms
attached as Exhibit A to this Agreement, (v) simultaneous with the execution of
the Upgrade Contract, Trendwest shall execute a form of assignment to TFI, which
will immediately execute an assignment to the Issuer
-15-
<PAGE> 19
attached to such Upgrade Contract, and indicate on the face of the Upgrade
Contract that such contract is being sold to the Issuer and pledged to the
Trustee pursuant to the Indenture, (vi) such Upgrade Contract shall be delivered
by Trendwest to the Custodian immediately after execution of such contract by
the Obligor, WorldMark and Trendwest (and, in any event, prior to the release of
the original Contract), (vii) the transfer of the Upgrade Contract shall not be
effective (and the lien of the Trustee on the existing Contract and the related
Receivable shall not be released) until after any applicable rescission period
has expired and (viii) clauses (i)-(vii) above shall be representations and
warranties of Trendwest, and Trendwest shall be obligated to purchase from the
Issuer any Upgrade Contract that does not comply with such representations and
warranties. Simultaneous with the delivery of such Upgrade Contract to the
Custodian, TFI shall deliver to the Trustee a supplement to this Agreement
substantially in the form of Annex A hereto subjecting such Contract to the
provisions hereof and providing with respect to such Upgrade Contract the
information required on the Contract Schedule. TFI shall pay to Trendwest,
through an increase in the intercompany debt between TFI and Trendwest, for such
Upgrade Contract an amount equal to the difference between the principal balance
of the Upgrade Contract on the date of such Upgrade and the Collateral Value of
the Contract being canceled because of such Upgrade as of such date.
Upon the acquisition by the Issuer of any Upgrade Contract pursuant to
the provisions of this Section 3.04(e), Trendwest hereby agrees that such
Upgrade Contract will be subject to all the terms and provisions of this
Agreement, the Receivables Purchase Agreement, the Servicing Agreement and the
Indenture just as if such Upgrade Contract had been one of the original
Contracts acquired on the Closing Date.
ARTICLE 4
COVENANTS
Section 4.01. Seller and Trendwest Covenants. Each Seller (and
Trendwest, with respect to subsections (c), (j), (n) and (q) of this Section
4.01) hereby covenants and agrees with the Issuer as follows:
(a) Except as hereinafter provided, such Seller will keep in
full effect its existence, rights and franchises as a corporation, and
will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this
Agreement or any of the Contracts and to perform its duties hereunder.
Any person into which such Seller may be merged or consolidated, or to
whom such Seller has sold substantially all of its assets, or any
corporation resulting from any merger, conversion or consolidation to
which such Seller shall be a party, or any Person succeeding to the
business of such Seller shall be the successor of such Seller
hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that (w) immediately after
giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01(c) hereof shall have been
-16-
<PAGE> 20
breached, (x) such successor executes an agreement of assumption, in
form reasonably satisfactory to the Trustee, to perform every
obligation under this Agreement, (y) such Seller shall have delivered
to the Issuer a certificate of an officer of such Seller and an Opinion
of Counsel each stating that such consolidation, merger, or succession
and such agreement of assumption complies with this Section 4.01 and
that all conditions precedent, if any, provided for in this Agreement
relating to such transaction have been complied with, and (z) such
Seller shall have delivered to the Issuer an Opinion of Counsel either
(1) stating that, in the opinion of such counsel, all financing
statements and continuation statements and amendments thereto have been
executed and filed that are necessary fully to preserve and protect the
interest of the Issuer in the Contracts and reciting the details of
such filings, or (2) stating that, in the opinion of such counsel, no
such action shall be necessary to preserve and protect such interest.
(b) Neither such Seller nor any of the directors, officers,
employees or agents of such Seller shall be under any liability to the
Issuer, the Trustee or the Holders of Notes for any action taken or for
refraining from the taking of any action in good faith pursuant to this
Agreement, or for errors in judgment not involving recklessness or
negligence; provided, however, that this provision shall not protect
such Seller against any breach of warranties or representations made
herein, or failure to perform its obligations in strict compliance with
this Agreement, or any liability which would otherwise be imposed by
reason of any breach of the terms and conditions of this Agreement.
Such Seller, and any director, officer, employee or agent of such
Seller, may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters
arising hereunder. Such Seller shall not be under any obligation to
appear in, prosecute, or defend any legal action that is not incidental
to its obligations as the seller of the Purchased Assets under this
Agreement and that in its opinion may involve it in any expense or
liability.
(c) Trendwest and the Sellers will from time to time, at
Trendwest's expense, execute and file such additional financing
statements (including continuation statements) as may be necessary or
which the Trustee may deem appropriate to preserve the security
interests and liens described in Section 3.01(a)(viii) hereof and are
reasonably satisfactory in form and substance to the Issuer.
(d) Such Seller will not change its name, identity or
corporate structure in any manner that would, could, or might make any
financing statement or continuation statement misleading within the
meaning of section 9-402(7) of the UCC, unless it shall have given the
Issuer and the Trustee at least 30 days' prior written notice thereof.
(e) Such Seller will give the Issuer and the Trustee at least
30 days' prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any
-17-
<PAGE> 21
amendment of any previously filed financing or continuation statement
or of any new financing statement.
(f) Such Seller will duly fulfill all obligations on its part
to be fulfilled under or in connection with each Contract and, except
with respect to Upgrades, will not change or modify the terms of the
Contracts except as expressly permitted by the terms of the Transaction
Documents and will do nothing to impair the rights of the Issuer or the
Trustee in the Purchased Assets. In the event that the rights of such
Seller sold hereunder to the Issuer under any Contract or any guaranty
of the related Obligor's obligations under any Contract are not
assignable to the Issuer, such Seller will enforce such rights on
behalf of the Issuer; the Seller is not aware of any such inability to
assign any Contracts.
(g) Such Seller will comply, in all material respects, with
all material acts, rules, regulations, orders, decrees and directions
of any governmental authority applicable to the Purchased Assets or any
part thereof; provided, however, that such Seller may contest any act,
regulation, order, decree or direction in any reasonable manner which
shall not materially and adversely affect the rights of the Issuer or
the Trustee in the Purchased Assets.
(h) Such Seller will advise the Issuer and the Trustee
promptly, in reasonable detail, of the occurrence of any breach by such
Seller following discovery by such Seller of such breach of any of its
representations, warranties and covenants contained herein.
(i) Such Seller will execute or endorse, acknowledge, and
deliver to the Issuer and the Trustee from time to time such schedules,
confirmatory assignments, conveyances, and other reassurances or
instruments and take such further similar actions relating to the
Purchased Assets, and the rights covered by the Transaction Documents,
as the Issuer or the Trustee may reasonably request to preserve and
maintain title to the Purchased Assets and the rights of the Trustee
and the Holders of Notes therein against the claims of all persons and
parties.
(j) Trendwest agrees to indemnify, defend and hold the Issuer
harmless from and against any and all loss, liability, damage,
judgment, claim, deficiency or expense (including interest, penalties,
reasonable attorney's fees and amounts paid in settlement) that is
caused by (i) a material breach at any time by any Seller or Trendwest
of its representations, warranties and covenants contained in Section
3.01 hereof or this Section 4.01 or (ii) any material information
furnished by such Seller which is set forth in any schedule delivered
hereunder, being untrue in any material respect when any such
representation was made or schedule delivered, provided that neither
Trendwest nor the Seller shall have any liability with respect to a
representation or warranty as to any specific Contract, Receivable or
the related Credits other than to purchase the related Receivable or
substitute for such Receivable in accordance with Section 3.03 hereof
unless such breach of representation or warranty is the result of the
fraud, negligence, bad faith or willful misconduct of such
-18-
<PAGE> 22
Seller or Trendwest. Trendwest shall also indemnify the Trustee and the
Servicer for any cost or expenses incurred by them in the enforcement
of this Agreement. The obligations of Trendwest under this Section
4.01(j) shall be considered to have been relied upon by the Issuer and
shall survive the execution, delivery and performance of this
Agreement, regardless of any investigation made by or on behalf of the
Issuer, until termination of the Indenture. If either Trendwest or such
Seller has made any indemnity payments pursuant to this Section 4.01(j)
and thereafter the recipient collects any of such amounts from others,
such party will promptly repay the amount collected to either Trendwest
or such Seller, as applicable, without interest.
(k) Such Seller will do nothing to disturb or impair the
acquisition hereunder by the Issuer of all of such Seller's right,
title and interest in the Purchased Assets.
(l) Such Seller (i) will (A) maintain its books and records
separate from the books and records of the Issuer and (B) maintain bank
accounts separate from those of the Issuer and (ii) will not, prior to
the payment of the Notes, (x) take any action that would cause the
dissolution or liquidation of the Issuer, (y) guarantee (directly or
indirectly), endorse or otherwise become contingently liable (directly
or indirectly) for the obligations of the Issuer or (z) institute
against the Issuer, or join any other person in instituting against the
Issuer, any case, proceeding or other action under any existing or
future bankruptcy, insolvency or similar laws.
(m) Such Seller shall notify the Issuer and the Trustee
promptly after becoming aware of any Lien on any Purchased Asset.
(n) On each date as of which Trendwest or TFI substitutes a
Receivable related to a Substitute Contract in accordance with Section
3.03 hereof, Trendwest or TFI shall provide to the Issuer a supplement
to this Agreement substantially in the form of Annex A hereto
subjecting such Contract and the related Receivable to the provisions
hereof and providing with respect to such Substitute Contract the
information required in the Contract Schedule.
(o) The annual financial statements of such Seller will
disclose the effects of the transactions contemplated by the
Transaction Documents in accordance with generally accepted accounting
principles. The resolutions, agreements and other instruments
underlying the Transaction Documents will be continuously maintained by
such Seller as official records.
(p) The affiliated group of which such Seller is a member
within the meaning of Section 1504 of the Code shall treat the
Contracts as owned by the Issuer for federal, state and local income
tax purposes.
(q) Trendwest will, at its own cost and expense, (i) retain
the Electronic Ledger as a master record of the Contracts and the
related Credits and copies of all documents relating to each Contract
(other than the original executed Contracts) as custodian for the
Issuer and other Persons, if any, with interests in the Contracts and
-19-
<PAGE> 23
the related Credits and (ii) mark the Contracts and the Electronic
Ledger to the effect that the Contracts and the related Receivables and
a security interest in, the related Credits have been acquired by the
Issuer and that they have been transferred and assigned to the Trustee
pursuant to the Indenture.
(r) Such Seller will perform the transactions contemplated by
this Agreement in a manner that is consistent with the Issuer's
ownership interest in the Purchased Assets. The Seller will respond to
all third party inquiries confirming the transfer of the Purchased
Assets to the Issuer.
(s) Such Seller shall immediately transfer to Servicer for
deposit in the Clearing Account any payment it receives relating to the
Purchased Assets.
(t) Such Seller will not amend its Certificate of
Incorporation or its By-laws without the prior written consent of the
Trustee and the Holders of a majority in principal amount of Notes
Outstanding.
Section 4.02. Issuer Covenants. The Issuer hereby covenants and agrees
with each Seller as follows:
(a) The Issuer hereby acknowledges and agrees that its rights
in the related Credits are expressly subject to the rights of the
related Obligors in such Credits pursuant to the related Contract.
(b) On each date as of which any interest in any Contract is
to be purchased or replaced by Trendwest or TFI pursuant to Section
3.03 hereof, the Issuer shall submit to Trendwest or TFI an instrument
of assignment assigning the Issuer's interest in such Receivable and
the related Credits to Trendwest or TFI, as applicable, signed by the
president, senior vice president or any vice president of the Issuer.
Each such assignment shall operate as an assignment, without recourse,
representation, or warranty, to Trendwest or TFI, as applicable, of all
of the Issuer's right, title, and interest in and to such Receivable,
the related Credits and any security documents relating thereto, such
assignment being an assignment outright and not for security, and upon
payment of the Purchase Price or delivery of a Substitute Contract,
Trendwest or TFI, as applicable, will thereupon own such interest in
the related Receivable and all such security and documents, free of any
further obligation to the Issuer with respect thereto. If in any
enforcement suit or legal proceeding it is held that Trendwest or TFI,
as applicable, may not enforce such Contract on the ground that it is
not a real party in interest or holder entitled to enforce such
Contract, the Issuer shall, at the Issuer's expense, take such steps as
the Issuer deems necessary to enforce such Contract, including bringing
suit in the Issuer's name.
(c) The Issuer warrants that it will have a valid security
interest in the related Credits and that it will warrant and defend
such interest in such Credits against all Persons, claims and demands
whatsoever. The Issuer shall not assign, sell, pledge, or
-20-
<PAGE> 24
exchange, or in any way encumber or otherwise dispose of the related
Credits, except as permitted under the Indenture.
(d) The Issuer shall treat the Purchased Assets as owned by
it for Federal, state and local income tax purposes, shall include in
the computation of its gross income for such purposes the other income
from the Purchased Assets, shall treat the Notes as its debt for such
purposes and shall deduct the interest paid or accrued with respect to
the Notes in accordance with its applicable method of accounting for
such purposes.
Section 4.03. Assignment of Purchased Assets. Trendwest and each
Seller understand that the Issuer will assign to and grant to the Trustee a
security interest in all its right, title and interest to this Agreement, the
Contracts, the related Credits and the Purchased Assets. Trendwest and each
Seller consent to such assignment and grants and further agrees that all
representations, warranties, covenants and agreements Trendwest or such Seller
made herein shall also be for the benefit of and inure to the Trustee and all
Holders from time to time of the Notes.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.01. Conditions to the Issuer's Initial Obligations. The
obligations of the Issuer to execute and deliver the Assignment to each Seller
on the Closing Date pursuant to, and perform it obligations pursuant to, this
Agreement shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of each Seller and
Trendwest contained in Sections 3.01(b) and 3.01(c) hereof and all
information provided in the Contract Schedule shall be true and correct
on the Closing Date, with the same effect as though such
representations and warranties had been made on such date, and each
Seller and Trendwest shall have delivered to the Issuer, the Trustee
and each original purchaser of the Notes an Officer's Certificate to
such effect;
(b) All representations and warranties of each Seller and
Trendwest contained in Section 3.01(a) hereof shall be true and correct
on the Closing Date with respect to the Contracts listed on the
Contract Schedule, with the same effect as though such representations
and warranties had been made on such date, and each Seller and
Trendwest shall have delivered to the Issuer, the Trustee and each
Holder of Notes an Officer's Certificate to such effect;
(c) Each Seller shall have delivered all other information
theretofore required or reasonably requested by the Issuer to be
delivered by such Seller hereunder, duly certified by an officer of
such Seller, and the Seller shall have substantially performed all
other obligations required to be performed as of the Closing Date by
the provisions of this Agreement;
-21-
<PAGE> 25
(d) On or prior to the Closing Date, each Seller shall have
delivered, or caused the delivery of, the Custodian Files related to
the Contracts identified in the Contract Schedule to the Custodian or
its agent and, subject to Section 2.04 hereof, there shall have been
made all filings, recordings and/or registrations, and there shall have
been given, or taken, any notice or any other similar action, as may be
necessary in the opinion of the Issuer, in order to establish and
preserve the right, title and interest of the Issuer in the Purchased
Assets;
(e) On or before the Closing Date, the Issuer, the Servicer,
the Subservicer and the Trustee shall have entered into the Servicing
Agreement;
(f) The Notes shall be issued and sold on the Closing Date,
the Issuer shall receive the full consideration due it upon the
issuance of the Notes, and the Issuer shall have applied such
consideration, to the extent necessary, to pay the related Purchased
Asset Price; and
(g) Each Seller shall have executed and delivered the
Assignment.
Section 5.02. Conditions to the Sellers' Obligations. The
obligations of each Seller to execute and deliver to the Issuer the Assignment,
and perform it obligations pursuant to, this Agreement on the Closing Date shall
be subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Issuer
contained in this Agreement shall be true and correct with the same
effect as though such representations and warranties had been made on
such date;
(b) The Issuer shall have executed and delivered the
Assignment; and
(c) All company and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall
be satisfactory in form and substance to each Seller, and each Seller
shall have received from the Issuer copies of all documents (including,
without limitation, records of corporate proceedings) relevant to the
transactions herein contemplated as each Seller may reasonably have
requested.
Trendwest's and TFI's obligations to repurchase the Contracts pursuant
to this Agreement shall not be affected by any failure of the Issuer to comply
with the provisions of clause (a) of this Section 5.02 subsequent to the Closing
Date.
-22-
<PAGE> 26
ARTICLE 6
TERM AND TERMINATION
Section 6.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the later of (i) payment with respect to the last Purchased Asset or (ii)
termination of the Indenture.
Section 6.02. Default by the Sellers or Trendwest. If either Seller
or Trendwest shall be in default under this Agreement and such default shall not
have been cured for a period of 60 days, or if either Seller or Trendwest shall
become insolvent or make an assignment for the benefit of its creditors or have
a receiver appointed for all or substantially all of its properties, or if any
proceedings commenced, or consented to, by either Seller or Trendwest are not
stayed or dismissed within 90 days after being commenced against either Seller
or Trendwest under any bankruptcy, insolvency or other law for the relief of
debtors, the Issuer shall have the right, in addition to any other rights it may
have under any applicable law, to terminate this Agreement upon 30 days' prior
written notice to such Seller or Trendwest, as applicable; provided that any
termination of this Agreement shall not release such Seller or Trendwest, as
applicable from any obligation under this Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.01. Amendments. This Agreement and the rights and
obligations of the parties hereunder may not be changed orally but only by an
instrument in writing signed by the party against which enforcement is sought.
This Agreement may be amended by the Issuer, Trendwest and the Sellers only with
the consent of the Holders of 66-2/3% in principal amount of Notes Outstanding.
Section 7.02. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York, without regard to
choice of law principles.
Section 7.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered personally, mailed by
registered or certified United States mail, postage prepaid, or sent via
overnight air courier or facsimile communication and addressed, in the case of
Trendwest, to 12301 N.E. 10th Place, Bellevue, Washington 98005, in the case of
either Seller, to the applicable Seller Address, and in the case of the Issuer,
to the Issuer Address. All notices and demands shall be deemed to have been
given either at the time of the delivery thereof to any officer of the Person
entitled to receive such notices and demands at the address of such Person for
notices hereunder, or on the third day after the mailing thereof to such
address, as the case may be. Any Person may change the address for notices
hereunder by giving notice of such change to the other Person.
Section 7.04. Separability Clause. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to
-23-
<PAGE> 27
the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 7.05. Assignment. Except as provided in Section 4.01(a),
this Agreement may not be assigned or delegated by either Seller without the
prior written consent of the Issuer, the Trustee and the Holders of 66-2/3% in
principal amount of the Notes Outstanding and may not be assigned or delegated
by the Issuer without the prior written consent of the Sellers, Trustee and the
Holders of 66-2/3% in principal amount of the Notes Outstanding.
Section 7.06. Further Assurances. Each of the Sellers and the Issuer
agrees to do such further acts and things and to execute and deliver to the
Trustee such additional assignments, agreements, powers and instruments as are
required by the Trustee to carry into effect the purposes of this Agreement or
to better assure and confirm unto the Trustee or the Holders of the Notes their
rights, powers or remedies hereunder. If any Obligor shall be in default under
any Contract, upon reasonable request from the Servicer, the Seller will take
all reasonable steps to assist in enforcing such Contract and preserving and
maintaining title to the Purchased Assets and the rights of the Trustee and the
Holders of the Notes therein against the claims of all persons and parties to
the extent each Seller is capable of performing such requested steps and the
Servicer reasonably determines that the assistance of the Seller is necessary to
effect the intent and purposes hereof.
Section 7.07. No Waivers; Cumulative Remedies. No failure to
exercise and no delay in exercising, on the part of the Issuer or either Seller,
any right, remedy, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise of any right, remedy, or
privilege hereunder preclude any other or further exercise hereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 7.08. Binding Effect; Third Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Holders of Outstanding Notes, and their respective successors and permitted
assigns.
Section 7.09. Set-Off. (a) Trendwest and each Seller hereby
irrevocably and unconditionally waive all right of set-off that it may have
under contract (including this Agreement), applicable law or otherwise with
respect to any funds or monies of the Issuer at any time held by or in the
possession of such Seller.
(b) The Issuer shall have the right to set-off against Trendwest and
each Seller any amounts to which such Seller may be entitled and to apply such
amounts to any claims the Issuer may have against such Seller from time to time
under this Agreement. Upon any such set-off the Issuer shall give notice of the
amount thereof and the reasons therefor.
Section 7.10. Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one original document.
-24-
<PAGE> 28
IN WITNESS WHEREOF, each Seller, Trendwest, and the Issuer have caused
this Agreement to be duly executed by their respective officers thereunto duly
authorized as of the date and year first above written.
TRENDWEST FUNDING I, INC., Seller
By_________________________________
Name:
Title:
TWH FUNDING I, INC., Seller
By_________________________________
Name:
Title:
TRENDWEST RESORTS, INC.
By_________________________________
Name:
Title:
TRI FUNDING COMPANY I, L.L.C., Issuer
By: TRENDWEST FUNDING I, INC., Member
By_______________________________
Name:
Title:
-25-
<PAGE> 29
ANNEX A
FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
Pursuant to Section 3.04(b) and Section 3.04(e) of the Purchase and
Sale Agreement dated as of March 1, 1996 (the "Sale Agreement"), between
Trendwest Funding I, Inc. ("TFI"), TWH Funding I, Inc. (together, with TFI, the
"Sellers"), Trendwest Resorts, Inc., and TFI Funding Company I, L.L.C., attached
as Schedule I hereto is a Supplemental Schedule, which includes information
regarding Purchased Assets that are hereby sold, assigned, transferred and
delivered by ____________ to the Issuer in accordance with the Sale Agreement
and the Assignment and setting forth the Collateral Value of any Contract being
sold to TFI by the Issuer pursuant to an Upgrade or exchanged pursuant to a
substitution.
______________________________________
By____________________________________
Name:
Title:
<PAGE> 30
SCHEDULE I
SUPPLEMENTAL SCHEDULE FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
<PAGE> 31
EXHIBIT A
FORM OF CONTRACT
<PAGE> 32
EXHIBIT B
FORM OF ASSIGNMENT
This Assignment Agreement ("Assignment") is made as of April 17, 1996
(the "Transfer Date"), by and between Trendwest Funding I, Inc., a Delaware
corporation, TWH Funding I, Inc., a Delaware corporation (each, an "Assignor"
and together, the "Assignors") and TFI Funding Company I, L.L.C., a Delaware
limited liability company (the "Assignee"), with reference to the following
facts:
RECITALS:
A. In connection with the sale of certain assets by the Assignors in
conjunction with the issuance of notes on the date hereof by the Assignee,
Assignee and the Assignors have executed the Purchase and Sale Agreement dated
as of March 1, 1996 (the "Sale Agreement").
B. In connection with the Sale Agreement, each Assignor desires to
assign and transfer to Assignee all of such Assignor's right, title and interest
in and to each of the purchased assets described in Schedule I hereto, as
supplemented from time to time, and the corresponding paragraphs below (the
"Assigned Interests").
C. Assignee desires to accept this Assignment and transfer of the
Assigned Interests.
D. Terms used but not defined herein have the meanings ascribed to
them in the Sale Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignors and Assignee hereby agree as follows:
1. Assignment. Each Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Sale Agreement, to
Assignee (and the successors and assigns of Assignee) the following property:
1.1. Such Assignor's right, title and interest in and to the
Receivables related to the Contracts described and listed on
Schedule I hereto.
1.2. A security interest in the vacation credits subject to such
Contracts (the "Credits").
1.3. All other Purchased Assets relating to such Contracts.
<PAGE> 33
2. Further Assurance. The Assignors and Assignee each hereby agree
to provide such further assurances and to execute and deliver such documents and
to perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
3. Distinct Entities. The Assignors and Assignee hereby acknowledge
that for all purposes the Assignors and Assignee are each separate and distinct
legal entities. Accordingly, the Assignors shall not be liable to any third
party for the debts, obligations and liabilities of the Assignee; and Assignee
shall not be liable to any third party for the debts, obligations and
liabilities of the Assignors.
4. Governing Law. This Assignment shall be governed by and
interpreted in accordance with the laws of the State of New York, and the
parties hereto hereby acknowledge and agree that this Assignment and the
transactions contemplated hereunder were negotiated and entered into in the
State of New York.
5. Authority. The Assignors and Assignee each hereby represent
respectively that they have full power and authority to enter into this
Assignment.
6. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
7. Successors and Assigns. The Assignors and Assignee each agree
that this Assignment will be binding and will inure to the benefit of each
Assignor and its successors and assigns and the Assignee and its successors and
assigns.
B-2
<PAGE> 34
IN WITNESS WHEREOF, this Assignment has been executed as of the date
first above written.
TRENDWEST FUNDING I, INC., ASSIGNOR
By___________________________________
Name:
Title:
TWH FUNDING I, INC., ASSIGNOR
By___________________________________
Name:
Title:
TFI FUNDING COMPANY I, L.L.C., ASSIGNEE
By: TRENDWEST FUNDING I, INC., MEMBER
By___________________________________
Name:
Title:
B-3
<PAGE> 35
EXHIBIT C
FORM OF SUBORDINATED NOTE
$_______________
TRI FUNDING COMPANY I, L.L.C.
SUBORDINATED NOTE
Date: April 17, 1996 Stated Maturity: June 15, 2004
TRI FUNDING COMPANY I, L.L.C., a limited liability company duly
organized and existing under the laws of the State of Delaware (the "Issuer,"
which term includes any successor entity under the Indenture referred to below),
for value received, hereby promises to pay to Trendwest Funding I, Inc. ("TFI"),
or its assigns, the principal sum of ___________________________________________
Dollars ($_____________) in monthly installments beginning on May 15, 1996 (the
"Initial Payment Date"), and to pay interest monthly in arrears on the unpaid
portion of said principal sum (and, to the extent that the payment of such
interest shall be legally enforceable, on any overdue installment of interest on
this Subordinated Note) on the fifteenth day of each calendar month or, if such
fifteenth day is not a Business Day, the Business Day immediately following
(each, a "Payment Date"), for the period from and including May 15, 1996 through
the last day of the Due Period immediately preceding the Initial Payment Date,
and thereafter, monthly from and including the first day through the last day of
the Due Period immediately preceding the applicable Payment Date, at the rate of
8.42% per annum (calculated on the basis of a 360-day year consisting of 12
months of 30 days each). Each monthly installment of principal payable on this
Subordinated Note shall be an amount equal to the cash available for
distribution pursuant to clause (xi) of Section 12.02(d) of the Indenture
(referred to herein as the "Indenture"), dated as of March 1, 1996, among the
Issuer, Trendwest Resorts, Inc., as Servicer, and LaSalle National Bank, as
Trustee until the principal amount owed hereunder, as adjusted as set forth
below, is paid in full. Any remaining unpaid portion of the principal amount of
this Subordinated Note shall be due and payable no later than the Stated
Maturity referred to above; provided, however, that if the Notes (as defined
below) are not paid in full on such date, no such amounts shall be due or
payable until the Notes are paid in full. All terms used in this Subordinated
Note which are defined in the Indenture shall have the meanings assigned to them
in the Indenture.
The principal and interest on this Subordinated Note are payable by
check mailed by first-class mail to TFI or its assigns or by wire transfer in
immediately available funds to the account specified in writing to the Trustee
by TFI or its assigns received at least five Business Days prior to the Record
Date for the Payment Date on which wire transfers will commence, in such coin or
currency of the United States of America as at the time of
<PAGE> 36
payment is legal tender for payment of public and private debts. Funds
represented by checks returned undelivered will be held for payment to the
Person entitled thereto, subject to the terms of the Indenture, at the office or
agency in the United States of America designated as such by the Issuer for such
purpose pursuant to the Indenture.
The principal owed on this Subordinated Note will be increased from
time to time in the event that TFI transfers an Upgrade Contract to the Issuer,
such amount to equal the difference between the principal balance of the Upgrade
Contract as of the date of such Upgrade and the Collateral Value on such date of
the Contract being replaced.
This Subordinated Note and the Issuer's 7.42% Receivables-Backed Notes,
Series 1996-1 (the "Notes") are secured by certain Contracts, Receivables and
other Collateral described in the Indenture. The Trust Estate also secures the
payment of certain other amounts and certain other obligations as described in
the Indenture. Until the Notes are paid in full and the obligations of the
Issuer under the Indenture are satisfied, (i) the Subordinated Notes are payable
only at the time and in the manner provided in the Indenture and are not
redeemable or prepayable at the option of the Issuer before such time and (ii)
the holder of this Subordinated Note will not cause the filing of a bankruptcy
petition against the Issuer for any reason whatsoever, including, without
limitation, the failure of the Issuer to make any payments of principal of or
interest on this Subordinated Note until after a period equal to 10 days plus
the applicable preference period under the United States Bankruptcy Code has
passed since the Notes were paid in full.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the holder of this Subordinated Note under the
Indenture at any time by the Issuer, the Trustee and the Servicer with the
consent of the Holders of not less than 66-2/3% in principal amount of Notes
Outstanding under the Indenture. The Indenture also contains provisions
permitting the Holders of specified percentages in aggregate principal amount of
the Notes, at the time Outstanding under the Indenture, to waive compliance by
the Issuer with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. This Subordinated Note shall not be
amended without the consent of Holders of not less than 66-2/3% in principal
amount of the Notes Outstanding.
No reference herein to the Indenture and no provision of this
Subordinated Note or of the Indenture shall alter or impair the obligation of
the Issuer, which is absolute and unconditional, to pay the principal of and
interest on this Subordinated Note, but, so long as any Notes are Outstanding,
solely from the Collateral pledged to the Trustee under the Indenture at the
times, place and rate, and in the coin or currency, herein prescribed.
Notwithstanding anything else to the contrary contained in this Subordinated
Note or the Indenture, the obligation of the Issuer to pay the principal of and
interest on this Subordinated Note is not a general obligation of the Issuer,
nor its officers or directors, but, so long as any Notes are Outstanding, is
limited solely to the Collateral pledged under the Indenture.
C-2
<PAGE> 37
So long as the Notes are Outstanding, TFI shall not transfer this
Subordinated Note to any Person.
This Subordinated Note and the Indenture shall be governed by and
construed in accordance with the internal laws of the State of New York, without
regard to conflicts of laws principles.
IN WITNESS WHEREOF, TRI Funding Company I, L.L.C. has caused this
Subordinated Note to be signed, manually, by the Treasurer of Trendwest Funding
I, Inc., as member.
TRI FUNDING COMPANY I, L.L.C.
By: TRENDWEST FUNDING I, INC., as Member
By:______________________________________
Treasurer
C-3
<PAGE> 38
SCHEDULE I
CONTRACT SCHEDULE
<PAGE> 1
CHAPMAN AND CUTLER
DRAFT OF APRIL 16, 1996
RECEIVABLES PURCHASE AGREEMENT
among
TRENDWEST RESORTS, INC.
("Trendwest")
and
TW HOLDINGS, INC.
("TW Holdings")
and
TRENDWEST FUNDING I, INC.
("TFI")
Dated as of March 1, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C> <C>
ARTICLE 1 DEFINITIONS ..................................................2
Section 1.01. Defined Terms ............................................2
ARTICLE 2 ACQUISITION OF ASSETS ........................................3
Section 2.01. [Reserved.] ..............................................3
Section 2.02. Acquisition ..............................................3
Section 2.03. [Reserved.] ..............................................3
Section 2.04. Delivery of Contracts ....................................4
Section 2.05. Servicing of Contracts and Related Credits ...............4
Section 2.06. Review of Contracts ......................................4
ARTICLE 3 REPRESENTATIONS AND WARRANTEES ...............................5
Section 3.01. Representations and Warranties of the Sellers ............5
Section 3.02. Representations and Warranties of TFI ...................12
Section 3.03. Purchase or Substitution Required upon
Breach of Certain Representations and Warranties ........13
Section 3.04. Requirements for Purchase or Substitution of Contracts ..14
ARTICLE 4 SELLER COVENANTS ............................................16
Section 4.01. Seller Covenants ........................................16
Section 4.02. TFI Covenants ...........................................19
Section 4.03. Assignment of Assets ....................................20
ARTICLE 5 CONDITIONS PRECEDENT ........................................20
Section 5.01. Conditions to TFI's Initial Obligations .................20
Section 5.02. Conditions to the Sellers' Obligations ..................21
ARTICLE 6 TERM AND TERMINATION ........................................22
Section 6.01. Term ....................................................22
Section 6.02. Default by Sellers ......................................22
ARTICLE 7 MISCELLANEOUS ...............................................22
Section 7.01. Amendments ..............................................22
Section 7.02. Governing Law ...........................................23
Section 7.03. Notices .................................................23
Section 7.04. Separability Clause .....................................23
Section 7.05. Assignment ..............................................23
Section 7.06. Further Assurances ......................................23
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.07. No Waivers; Cumulative Remedies .........................23
Section 7.08. Binding Effect; Third Party Beneficiaries ...............24
Section 7.09. Set-Off .................................................24
Section 7.10. Counterparts ............................................24
</TABLE>
ANNEX A -- FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS AND UPGRADE
CONTRACTS
EXHIBIT A -- FORM OF CONTRACT
EXHIBIT B -- FORM OF ASSET ASSIGNMENT
-ii-
<PAGE> 4
THIS RECEIVABLES PURCHASE AGREEMENT, dated as of March 1, 1996 (this
"Agreement"), by and among Trendwest Resorts, Inc., an Oregon corporation
(herein, together with its permitted successors and assigns, "Trendwest"), TW
Holdings, Inc., a Nevada corporation (herein, together with its permitted
successors and assigns, "TW Holdings"), and Trendwest Funding I, Inc., a
Delaware corporation (herein, together with its permitted successors and
assigns, "TFI").
PRELIMINARY STATEMENT
TRI Funding Company I, L.L.C., a Delaware limited liability company
(the "Issuer") has entered into an Indenture, dated as of March 1, 1996 (as
amended and supplemented from time to time, the "Indenture"), with LaSalle
National Bank, as trustee (herein, together with its permitted successors and
assigns, the "Trustee"), and Trendwest, as servicer (herein, together with its
permitted successors and assigns, the "Servicer"), pursuant to which the Issuer
intends to issue its Notes as provided in the Indenture (the "Notes").
In furtherance thereof, Trendwest and TW Holdings, (collectively, the
"Sellers") and TFI have entered into this Agreement to provide for, among other
things, the acquisition by TFI of all of the right, title and interest in and to
certain Assets which will be sold by TFI to the Issuer pursuant to that certain
Purchase and Sale Agreement, dated as of even date herewith, by and among TFI,
SPC and the Issuer (the "Sale Agreement"). The Issuer will be pledging to the
Trustee the Assets, and the Issuer will be granting to the Trustee a security
interest in the Assets, as security for the Notes. As a precondition to the
effectiveness of this Agreement, the Issuer, the Trustee, the Subservicer and
the Servicer will enter into the Servicing Agreement, dated as of March 1, 1996
(as amended and supplemented from time to time, the "Servicing Agreement"), to
provide for the administration and servicing of the Assets. In connection with
the issuance of the Notes and pursuant to this Agreement, the Sellers will sell
the Assets to TFI. Such sale shall be effected by this Agreement and an Asset
Assignment among the Sellers and TFI, and the list of Contracts so conveyed
shall be listed on Schedule I to such Asset Assignment.
In order to further secure the Notes, TFI is granting to the Issuer,
pursuant to the Sale Agreement, and the Issuer subsequently will grant to the
Trustee pursuant to the Indenture, a security interest in, among other things,
TFI's rights derived under this Agreement, and the Sellers agree that all
representations, warranties, covenants and agreements made by them in this
Agreement with respect to the Assets shall also be for the benefit and security
of the Issuer and the Trustee and all holders from time to time of the Notes. In
consideration for the Assets and their representations, warranties, covenants
and other agreements under this Agreement, the Sellers will receive cash on the
Closing Date and an interest in payments to TFI from the Issuer.
<PAGE> 5
ARTICLE 1
DEFINITIONS
Section 1.01. Defined Terms. For purposes of this Agreement the
following terms shall have the meanings specified herein. Capitalized terms used
herein but not otherwise defined shall have the respective meanings assigned to
such terms in the Indenture or the Sale Agreement.
"Acquisition Consideration" shall mean, with respect to any Contracts
and the related Receivables, the cash which shall be paid by TFI to the Sellers
on the Closing Date and an interest in payments to TFI from the Issuer in an
aggregate amount equal to 100% of the aggregate principal amount outstanding on
the Contracts as of the Cut-Off Date plus accrued interest through the Closing
Date.
"Asset Assignment" shall mean the Asset Assignment, substantially in
the form attached hereto as Exhibit B, which shall be entered into in connection
with the conveyance of Assets from the Sellers to TFI on the Closing Date.
"Assets" shall mean all of the Sellers' right, title and interest in
and to (a) the Contracts and the related Receivables, including the proceeds of
the Contracts and the related Receivables and all payments received on or with
respect to the Contracts and the related Receivables and due after the Cut-Off
Date, (b) the Contract Files and the Custodian Files, (c) the Sellers' rights
and interests in the related Credits, (d) the Servicing Charges with respect to
the Contracts and (e) all income and proceeds of the foregoing or relating
thereto.
"Contract File" shall mean, with respect to each Contract, the
following documents:
(i) a copy of the Contract;
(ii) notice of assignment; and
(iii) any other documents or papers relating to servicing the
Receivables.
"Custodian" shall mean Sage Systems, Inc. and its permitted
successors and assigns.
"Custodian File" shall mean, with respect to each Contract, the
following documents:
(i) the original Contract; and
(ii) notice of assignment.
"Cut-Off Date" shall have the meaning set forth in the Indenture.
-2-
<PAGE> 6
"Electronic Ledgers" shall mean the electronic master records of all
contracts of the Sellers or the Issuer similar to and including the Contracts.
"Eligible Contract" shall mean a Contract that satisfies the selection
criteria set forth in Section 3.01(a) hereof and which is aged at least four
months, provided that with respect to any Substitute Contract, any reference in
such Section to Cut-Off Date shall be deemed to refer to the date as of which
such Substitute Contract is conveyed to the Seller in accordance with Section
3.04 hereof.
"Indenture" shall mean the Indenture, dated as of March 1, 1996, by and
among the Issuer, the Trustee and the Servicer, as amended and supplemented from
time to time.
"Seller Address" with respect to Trendwest shall mean 12301 N.E. 10th
Place, Bellevue, Washington 98005 and with respect to TW Holdings shall mean 245
E. Liberty Street, 3rd Floor, Reno, Nevada 89520.
"SPC" shall mean TWH Funding, Inc. and its successors in interest.
"Substitute Contract" shall have the meaning set forth in Section
3.04(b) hereof.
"Substitute Receivable" shall mean the Receivable related to a
Substitute Contract.
"Substitution Criterion" shall have the meaning set forth in Section
3.04(b) hereof.
"TFI Address" shall mean 12301 N.E. 10th Place, Bellevue, Washington
98005.
"Upgrade" shall have the meaning set forth in the Indenture.
"Upgrade Contract" shall have the meaning set forth in the Indenture.
ARTICLE 2
ACQUISITION OF ASSETS
Section 2.01. [Reserved.]
Section 2.02. Acquisition. In return for the Asset Consideration and
other rights created by this Agreement, each of the Sellers hereby transfers,
assigns, sells and grants to TFI, without recourse except as provided in Section
3.03 of this Agreement, on the Closing Date, any and all of such Seller's
respective right, title and interest in and to all of the Assets relating to the
Contracts set forth on Schedule I to the Asset Assignment. Each of the Sellers
hereby acknowledges that its transfer of the Assets to TFI is absolute and
irrevocable, without reservation or retention of any interest whatsoever by such
Seller.
Section 2.03. [Reserved.]
-3-
<PAGE> 7
Section 2.04. Delivery of Contracts; Filing of Financing Statements.
(a) In connection with TFI's acquisition of the Assets, Trendwest, on behalf of
the Sellers, TFI and the Issuer, shall deliver, or cause the delivery of, the
original Contracts to the Custodian so that the Custodian may retain possession
thereof as provided in the Transaction Documents. In addition, the Sellers agree
to execute, and Trendwest agrees to record and file prior to the Closing Date at
its own expense, financing statements (and thereafter timely continuation
statements with respect to such financing statements) with respect to the
Assets, in accordance with Section 3.01(a)(viii) and Section 4.01(c) hereof.
(b) In connection with such acquisition, each of the Sellers shall
promptly, at its own expense, cause any Electronic Ledger maintained by it to be
marked to show which Assets have been acquired by TFI in accordance with this
Agreement and transferred by TFI to the Issuer and pledged by the Issuer to the
Trustee in accordance with the Transaction Documents.
(c) It is the intention of the Sellers and TFI that TFI is acquiring
full and absolute title to the Assets. If it is determined, however, that the
Sellers have transferred to TFI a security interest in the Assets, then this
Agreement shall constitute a security agreement under applicable law, and each
of the Sellers does hereby pledge, grant and assign to TFI a security interest
in the Assets.
Section 2.05. Servicing of Contracts and Related Credits. The Servicer
shall service the Contracts and the other Assets for the benefit of the Issuer
(and its successors and assigns) in accordance with the terms and conditions of
the Transaction Documents. Notwithstanding the foregoing, Trendwest acknowledges
and agrees that its obligations under this Agreement are independent of any
obligations it may have as Servicer and that its obligations under this
Agreement will continue in full force and effect, whether or not it is acting as
Servicer, until termination of this Agreement in accordance with Section 6.01
hereof, unless otherwise provided herein.
Section 2.06. Review of Contracts. If any of the Sellers or the
Custodian (who shall thereupon notify TFI, Trendwest and the Trustee) discovers
that any Contracts are missing or defective (that is, mutilated, damaged,
defaced, incomplete, improperly dated, forged or otherwise physically altered)
in any material respect, Trendwest shall correct or cure such omission, defect
or other irregularity within 30 days from the date Trendwest discovered such
omission or defect, or from the date Trendwest is notified by the Custodian of
such omission or defect. In the event Trendwest is unable to correct or cure
such omission, defect or irregularity within the 30-day period described in the
preceding sentence, Trendwest shall purchase or replace such Contract from TFI
in accordance with Section 3.03 hereof.
-4-
<PAGE> 8
ARTICLE 3
REPRESENTATIONS AND WARRANTEES
Section 3.01. Representations and Warranties of the Sellers. Each of
Trendwest, with respect to all of the Contracts and related Receivables, and TW
Holdings, with respect to the Contracts and related Receivables transferred by
TW Holdings hereby and by the Asset Assignment, hereby makes the following
representations and warranties to TFI and for the benefit of the Issuer, the
Trustee and Holders of the Notes, on which TFI relies in acquiring the Assets
and on which the Holders rely in purchasing the Notes. Such representations and
warranties shall survive any subsequent transfer, assignment, contribution or
conveyance of the Contracts and related Receivables and interest in the related
Credits and any issuance of Notes.
(a) As to each Contract, as of the Closing Date:
(i) The information set forth in the Contract Schedule is true
and correct as of the Cut-Off Date.
(ii) The rights with respect to the Contract are assignable by
the lender thereunder and its successors and assigns without the
consent of any Person.
(iii) The applicable Seller has heretofore provided to the
Custodian the sole original counterpart of the Contract, together with
any and all amendments, waivers and modifications thereto, except for
any original executed counterparts which have been marked to show that
they have been pledged by the Issuer to the Trustee under the
Indenture, and the terms of such Contract have not been further
amended, waived or modified subsequent to the above being provided to
the Custodian.
(iv) The Electronic Ledgers have been marked as provided in
Section 2.04(b) hereof.
(v) The Contract was not originated in, nor is it subject to
the laws of, any jurisdiction, the laws of which would make unlawful
the sale, transfer or assignment of such document under any of the
Transaction Documents, including any repurchase in accordance with the
Transaction Documents.
(vi) The Contract is in full force and effect in accordance
with its respective terms, and none of the Sellers or any Obligor has
or will have suspended or reduced any payments or obligations due or to
become due thereunder by reason of a default by the other party to such
Contract; as of the Closing Date, no Scheduled Payment with respect to
such Contract has not been received and remains unpaid for a period of
30 or more days (without regard to advances, if any, made by the
Servicer), and there are no proceedings pending, or to the best of the
knowledge of any Seller, threatened asserting
-5-
<PAGE> 9
insolvency of such Obligor; there has been no other default, breach or
violation and no event other than relating to an Upgrade, permitting
acceleration under such Contract; there are no proceedings pending, or
to the best of the knowledge of any Seller, threatened, wherein such
Obligor or any governmental agency has alleged that such Contract is
illegal or unenforceable; and none of the related Scheduled Payments
are subject to any set-off or credit of any kind.
(vii) The Contract is the valid, binding and legally
enforceable obligation of the parties thereto, enforceable in
accordance with its terms, subject, as to enforcement, to applicable
bankruptcy, insolvency, reorganization and other similar laws of
general applicability relating to or affecting creditors' rights
generally and to general principles of equity regardless of whether
enforcement is sought in a court of law or equity.
(viii) All actions, filings (including UCC filings) and
recordings as are required by the Indenture and that may be necessary
to perfect a first priority security interest of the Issuer and the
Trustee in, and the sale by the applicable Seller to TFI and the sale
from TFI to the Issuer of, the Contract and the related Receivables
being acquired and the granting of a security interest in the security
interest in the related Credits hereunder have been accomplished and
are in full force and effect.
(ix) The Contract is identical to one of the form contracts
attached as Exhibit A hereto, except for either (i) such immaterial
modifications or deviations from the form contract which appear in such
Contract, which immaterial modifications or deviations will not have a
material adverse effect on the Holders of the Notes or (ii) such
modifications or deviations as set forth on Schedule I to the Asset
Assignment related to such Contract.
(x) The Contract was originated by Trendwest in Trendwest's
ordinary course of business and meets Trendwest's qualifications for
originating vacation credit installment contracts. The origination and
collection practices used by Trendwest and the applicable Seller with
respect to such Contract have been in all respects legal, proper,
prudent and customary in the vacation credit financing and servicing
business.
(xi) The Receivable is under a Contract that has a term to the
last Scheduled Payment Date of not more than 84 months and not less
than one month.
(xii) The Contract obligates the related Obligor to make all
Scheduled Payments thereunder in full notwithstanding the collection by
Trendwest of a security deposit with respect thereto. The calculation
of the Collateral Value of the related Receivable does not include any
security deposits or similar
-6-
<PAGE> 10
payments collected by or on behalf of Trendwest which are applied to
Scheduled Payments.
(xiii) All requirements of applicable federal, State and local
laws, and regulations thereunder, including, without limitation, usury
laws, if any, in respect of the Contract have been complied with in all
material respects, and such Contract complied in all material respects
at the time it was originated or made and now complies in all material
respects with all legal requirements of the jurisdiction in which it
was originated.
(xiv) The Contract is not and will not be subject to any right
of rescission, set-off, counterclaim or defense, including the defense
of usury, whether arising out of transactions concerning such Contract
or otherwise, and the operation of any of the terms of such Contract or
the exercise by the applicable Seller or the Obligor of any right under
such Contract will not render such Contract unenforceable in whole or
in part, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto, except that certain
rights or defenses may exist under applicable law which, individually
or in the aggregate, do not make the remedies available to the Seller
with respect to such Contract inadequate for the practical realization
of the benefits provided thereby.
(xv) Each of the Sellers has duly fulfilled all obligations on
the lender's part to be fulfilled under or in connection with the
Contract, including, without limitation, giving any notices or consents
necessary to effect the acquisition of the Assets by TFI and has done
nothing to impair the rights of TFI in such Contract or payments with
respect thereto.
(xvi) The Contract and the related Seller's interest in the
related Credits have not been sold, transferred, assigned or pledged by
the Seller to any Person other than the Issuer (except for such
interests in the Purchased Assets which shall be terminated on or prior
to the Closing Date), and upon execution and delivery hereof and of the
Asset Assignment by the related Seller and the payment by the Issuer of
the related Acquisition Consideration, TFI will have all of the right,
title and interest in and to such Seller's interest in the Contract and
the related Receivable and a security interest in the related Credits,
free and clear of all liens and encumbrances, except for the interests
of the Obligor pursuant to such Contract. Such Contract has not been
satisfied, subordinated or rescinded.
(xvii) The relevant Seller has no specific knowledge that the
Contract will not be fully performed in accordance with its terms.
(xviii) The Obligor has made the first payment (which payment
may be an advance payment under such Contract) due under the Contract
within the time set forth in such Contract.
-7-
<PAGE> 11
(xix) The related Obligor is located in the United States of
America or Canada, and the related Scheduled Payments are payable in
U.S. dollars.
(xx) Except for changes due to Upgrades, the related Scheduled
Payments were established at the time such Contract was originated.
(xxi) There are no unpaid brokerage or other fees owed to
third parties relating to the origination of the Contract.
(xxii) The Contract cannot be rescinded pursuant to applicable
consumer finance laws.
(xxiii) The contract was originated in compliance with the
requirements of all federal, state and local laws, rules and
regulations applicable to the origination of the Contract (including,
without limitation, the Federal Truth-in-Lending Act, the Equal Credit
Opportunity Act, the Fair Credit Billing Act, the Fair Credit Reporting
Act, the Fair Debt Collection Practices Act, the Federal Trade
Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve
Board's Regulations "B" and "Z", the Soldiers' and Sailors' Civil
Relief Act of 1940, and any other federal, state and local laws
relating to interest, usury, consumer credit, equal credit opportunity,
fair credit reporting, privacy, consumer protection, false or deceptive
trade practices and disclosure, the Mail Fraud statute and any
timeshare disclosure), non-compliance with which could have a material
adverse effect on the enforceability or value of the Contract.
(xxiv) All Scheduled Payments are due and payable on a monthly
basis and such Scheduled Payments are level payments throughout the
terms of the Contracts.
(b) As to the aggregate pool of Contracts as of the Closing Date no
Seller used any selection procedures that identified the Contracts as being less
desirable or valuable than other comparable vacation credit installment
contracts owned by such Seller.
(c) As to each Seller as of the Closing Date:
(i) Such Seller has been duly organized and is validly
existing and in good standing as a corporation under the laws of the
State in which such Seller was organized with corporate power and
authority to own its properties and to transact the business in which
it is now engaged, and such Seller is duly qualified to do business in
and is in good standing under the laws of each State in which its
business is located or is not required under applicable law to effect
such qualification, except where failure to so qualify would not have a
material adverse effect on the ability of such Seller to perform its
obligations under the Transaction Documents or on any of the Contracts,
the Receivables or the
-8-
<PAGE> 12
related Credits or on the ability of such Seller, TFI, the Issuer or
the Trustee to realize upon or enforce the same.
(ii) The performance of the obligations of such Seller under
this Agreement and the other Transaction Documents and the consummation
of the transactions herein and therein contemplated will not conflict
with or result in any breach of any of the terms or provisions of, or
constitute with or without notice, lapse of time or both, a default
under the Articles of Incorporation or Bylaws of such Seller, or any
material indenture, agreement, mortgage, deed of trust or other
instrument to which such Seller is a party or by which it is bound, or
result in the creation or imposition of any lien, charge or encumbrance
(except the lien created by the Transaction Documents) upon any of the
property or assets of such Seller pursuant to the terms of such
indenture, mortgage, deed of trust, or other agreement or instrument to
which such Seller is a party or by which such Seller is bound or to
which any of such Seller's property or assets is subject, nor will such
action result in any violation of the provisions of such Seller's
Articles of Incorporation or By-laws or any statute or any order, rule
or regulation of any court or any regulatory authority or other
governmental agency or body having jurisdiction over such Seller or any
of its properties; and no consent, approval, authorization, order,
registration or qualification of or with or other action of any court,
or any such regulatory authority or other governmental agency or body
is required for consummation of the transactions contemplated by this
Agreement and the other Transaction Documents except such consents,
approvals and authorizations which have been obtained or such
registrations or qualifications which have been made.
(iii) This Agreement and any other Transaction Document to
which such Seller is a party have been duly authorized, executed and
delivered by such Seller by all necessary corporate action and such
agreements are the valid and legally binding obligations of such
Seller, enforceable against such Seller in accordance with their
respective terms, subject as to enforcement to applicable bankruptcy,
insolvency, reorganization and other similar laws of general
applicability relating to or affecting creditors' rights generally and
to general principles of equity regardless of whether enforcement is
sought in a court of law or equity.
(iv) The relevant Seller Address is the chief executive
office, principal place of business and the office where such Seller
keeps its records concerning the Contracts, Receivables and the related
Credits. Such Seller has not used any address other than its Seller
Address and 4010 Lake Washington Boulevard, Suite 300, Kirkland,
Washington 98033, in the previous five-year period. Such Seller's legal
name is as set forth in this Agreement. Such Seller has not used or
done business under any other name in the previous six-year period.
-9-
<PAGE> 13
(v) Such Seller does not believe, nor does it have any
reasonable cause to believe, that it cannot perform each and every
covenant contained in this Agreement.
(vi) The transactions contemplated by the Transaction
Documents are being consummated by such Seller in furtherance of its
ordinary business purposes, with no contemplation of insolvency and
with no intent to hinder, delay or defraud any of its present or future
creditors.
(vii) The consideration received by such Seller pursuant to
this Agreement is fair consideration having value reasonably equivalent
to or in excess of the value of the performance of such Seller's
obligations hereunder.
(viii) Neither on the date of the transactions contemplated by
the Transaction Documents or immediately before or after such
transactions, nor as a result of the transactions, will such Seller:
(A) be insolvent such that the sum of its debts is
greater than all of its respective property, at a fair
valuation;
(B) be engaged in, or about to engage in, business or a
transaction for which any property remaining with such Seller
will be an unreasonably small capital or the remaining assets
of such Seller will be unreasonably small in relation to its
respective business or the transaction; and
(C) have intended to incur, or believed it would incur,
debts that would be beyond its respective ability to pay as
such debts mature or become due. Such Seller's assets and cash
flow enable it to meet its present obligations in the ordinary
course of business as they become due.
(ix) Both immediately before and after the transactions
contemplated by the Transaction Documents (a) the present fair salable
value of such Seller's assets was or will be in excess of the amount
that will be required to pay its probable liabilities as they then
exist and as they become absolute and matured; and (b) the sum of such
Seller's assets was or will be greater than the sum of its debts,
valuing its assets at a fair salable value.
(x) The acquisition of the Assets by TFI pursuant to this
Agreement is not subject to the bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction.
(xi) There are no proceedings or investigations pending or, to
the knowledge of such Seller, threatened against or affecting such
Seller in or before any court, governmental authority or agency or
arbitration board or tribunal which, individually or in the aggregate,
involve the possibility of
-10-
<PAGE> 14
materially and adversely affecting the properties, business, prospects,
profits or condition (financial or otherwise) of such Seller, or the
ability of such Seller to perform its obligations under this Agreement
or the other Transaction Documents. Such Seller is not in default with
respect to any order of any court, governmental authority or agency or
arbitration board or tribunal.
(xii) All tax returns or extensions required to be filed by
such Seller in any jurisdiction have in fact been filed, and all taxes,
assessments, fees and other governmental charges upon such Seller, or
upon any of the respective properties, income or franchises shown to be
due and payable on such returns have been, or will be, paid. All such
tax returns are true and correct, and such Seller has no knowledge of
any proposed additional tax assessment against it in any material
amount nor of any basis therefor. The provisions for taxes on the books
of such Seller are in accordance with generally accepted accounting
principles.
(xiii) Such Seller (i) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject,
(ii) has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its
property or to the conduct of its business, and (iii) is not in
violation in any material respect of any term of any agreement, charter
instrument, bylaw or instrument to which it is a party or by which it
may be bound which violation or failure to obtain might materially
adversely affect the business or condition (financial or otherwise) of
such Seller.
(xiv) The Sellers and TFI are members of an affiliated group
within the meaning of Section 1504 of the Code which has filed and will
continue to file a consolidated federal income tax return at all times
until termination of the Transaction Documents.
(xv) It is the intention of such Seller that the Assets are
being or have been acquired by TFI and that the beneficial interest in
and title to the Assets are not part of such Seller's estate in the
event of the filing of a bankruptcy petition by or against such Seller
under any bankruptcy law.
(xvi) Immediately prior to the acquisition of the Assets by
TFI pursuant to this Agreement, such Seller was the sole owner of its
portion of the Assets at such time and had good and marketable title to
the Assets, free and clear of all liens, claims and encumbrances
(except for the Acquisition Consideration and security interests in the
Assets which shall be terminated on or prior to the Closing Date).
(xvii) The Sellers will treat the transfer of the Assets as a
sale to TFI for federal, State and local income tax reporting and
accounting purposes.
-11-
<PAGE> 15
(xviii) The sale of the Assets pursuant to this Agreement
constitutes the valid sale by the Sellers to TFI of all of the Sellers'
right, title and interest in the Assets.
(xix) The Sellers have valid business reasons for selling the
Assets to TFI pursuant to this Agreement rather than obtaining a loan
secured by the Assets.
(xx) The Sellers will be operated generally so as to not be
substantively consolidated with TFI for bankruptcy purposes.
(xxi) No event has occurred that adversely affects the
Sellers' ability to perform the transactions contemplated by the
Transaction Documents.
(xxii) Each pension plan or profit sharing plan to which each
of the Sellers is a party has been fully funded in accordance with the
obligations of such Seller as set forth in such plan.
(xxiii) Neither the acquisition nor the holding of the
Contracts and the related Receivables violates any federal or State
law, rule or regulation the non-compliance with which could have a
material adverse effect on the value of the Contracts or the related
Receivables.
Section 3.02. Representations and Warranties of TFI. TFI hereby makes
the following representations and warranties for the benefit of the Issuer, the
Trustee and Holders of the Notes, on which the Sellers rely in entering into
this Agreement with TFI and on which the Holders of the Notes rely in purchasing
the Notes; such representations and warranties speak as of the Closing Date
unless otherwise indicated, but shall survive any subsequent transfer,
assignment, contribution or conveyance of the Assets or any part thereof:
(a) TFI has been duly organized and is validly existing in
good standing as a corporation under the laws of the State of Delaware,
with corporate power and authority to own its properties, perform its
obligations under the Transaction Documents and to transact the
business in which it is now engaged or in which it proposes to engage;
TFI is duly qualified to do business and is in good standing in each
State in which the nature of its business requires it to be so
qualified, except where failure to so qualify would not have a material
adverse effect on the ability of TFI to perform its obligations under
the Transaction Documents.
(b) The transfer to and receipt by TFI of the Sellers'
interest in the Contracts, the Receivables and the related Credits
pursuant to this Agreement and the consummation of the transactions
contemplated herein and in the Transaction Documents will not conflict
with or result in breach of any of the terms or provisions of, or
constitute (with or without notice, lapse of time or both) a default
under the Certificate of Incorporation or By-laws of TFI or any
material indenture, agreement, mortgage, deed of trust or other
instrument to which TFI is a party or by which it is
-12-
<PAGE> 16
bound, or result in the creation or imposition of any lien, charge or
encumbrance (except for the lien created by the Sale Agreement and the
Indenture) upon any of the property or assets of TFI pursuant to the
terms of, such indenture, mortgage, deed of trust, or other agreement
or instrument to which TFI is a party or by which it is bound or to
which any of the property or assets of TFI is subject, nor will such
action result in any violation of the provisions of the Certificate of
Incorporation or By-laws of TFI or any statute or any order, rule or
regulation of any court or regulatory authority or other governmental
agency or body having jurisdiction over TFI or any of its properties;
and no consent, approval, authorization, order, registration or
qualification of or with or other action of any court or any such
regulatory authority or other governmental agency or body is required
for the acquisition of the Assets hereunder.
(c) The Transaction Documents to which TFI is a party have
been duly authorized, executed and delivered by TFI by all necessary
corporate action and constitute valid and legally binding obligations
of TFI enforceable against TFI in accordance with their terms, subject
as to enforcement to bankruptcy, insolvency, reorganization and other
similar laws of general applicability relating to or affecting
creditors' rights generally and to general principles of equity
regardless of whether enforcement is sought in a court of equity or
law.
(d) There are no proceedings or investigations to which TFI is
a party pending or, to the knowledge of TFI, threatened, before any
court, regulatory body, administrative agency or other tribunal or
governmental instrumentality (a) asserting the invalidity of this
Agreement, (b) seeking to prevent the issuance of the Notes or the
consummation of any of the transactions contemplated by this Agreement,
or (c) seeking any determination or ruling that would materially and
adversely affect the performance by TFI of its obligations under, or
the validity or enforceability of, this Agreement.
(e) All approvals, authorizations, consents, orders or other
actions of any Person or of any court, governmental agency or body or
official, required in connection with the execution and delivery of
this Agreement, have been or will be taken or obtained on or prior to
the Closing Date.
(f) The TFI Address is the principal place of business and
chief executive office of TFI.
Section 3.03. Purchase or Substitution Required upon Breach of Certain
Representations and Warranties. Upon discovery by TFI or any of the Sellers of
the breach of any representations or warranties set forth in Section 3.01 or
3.02 hereof which materially and adversely affects the value of a Contract,
Receivable, the related Credits, or the interests of the Holders of the Notes,
or a breach of any of the representations and warranties set forth in Sections
3.01(a)(v), 3.01(a)(vi), 3.01(a)(vii), 3.01(a)(xiii), 3.01(a)(xiv),
3.01(a)(xvi), 3.01(a)(xxii) or 3.01(a)(xxiii) hereof, the party discovering such
breach shall give prompt written notice to the other parties. Trendwest shall,
within 30 days
-13-
<PAGE> 17
from the date it was notified of, or otherwise discovers, such breach, cure such
breach, or, (1) if the breach relates to a particular Contract and is not cured,
either (a) purchase TFI's interest in such Contract and the related Receivable
from TFI at the Purchase Price or (b) provide a Substitute Contract or (2) if
the breach relates to a representation or warranty regarding the selection
criteria of the Contracts as a whole and is not cured by Trendwest, either (a)
purchase TFI's interest in such non-conforming Contracts and the related
Receivables from TFI or (b) provide Substitute Contracts as set forth above, so
that the representations and warranties with respect to the selection criteria
are correct, as evidenced by a certificate of an officer of Trendwest to the
Trustee. The Purchase Price for a purchased Contract shall be paid, and any
Substitute Contract shall be delivered, by Trendwest to TFI in accordance with
Section 3.04(c) hereof. It is understood and agreed that the obligation of
Trendwest to cure or purchase or replace any Contract as to which such a breach
has occurred shall constitute the sole remedy respecting such breach available
to TFI, the Issuer, the Holders of Notes or the Trustee on behalf of such
Holders (except for any indemnities provided under Section 4.01(j) hereof or any
obligations under the Sale Agreement or the Indenture) for any losses, claims,
damages and liabilities arising from TFI's interest in such Contract or the
inclusion of TFI's interest in such Contract in the Trust Estate.
Section 3.04. Requirements for Purchase or Substitution of Contracts;
Upgrades. (a) If Trendwest is required to purchase TFI's interest in any
Contract and the related Receivables under Section 3.03 hereof, if TFI or
Trendwest is required to purchase the Issuer's interest in any Contract and the
related Receivables under Section 3.03 of the Sale Agreement, or if the Issuer
is required or elects to purchase the Trustee's interest in any Contract and the
related Receivables under Section 3.10 of the Servicing Agreement, such Contract
and related Receivables shall be purchased by Trendwest at the Purchase Price.
All purchases shall be accomplished at the times specified in subsection (c)
below.
(b) If Trendwest is required to substitute any Contract under Section
3.03 hereof or if TFI or Trendwest is required to substitute any Contract under
Section 3.03 of the Sale Agreement (a "Substitute Contract"), each such
Substitute Contract shall (i) be an Eligible Contract; (ii) be written on one of
the standard forms attached as Exhibit A to this Agreement; (iii) be accompanied
by a supplement to this Agreement substantially in the form of Annex A hereto
subjecting such Contract to the provisions hereof and providing with respect to
such Substitute Contract the information required in the Contract Schedule; (iv)
not have been selected using procedures that identified the Contracts as being
less desirable or valuable than other comparable vacation credit installment
contracts owned by Trendwest; and (v) not have any Scheduled Payments that are
due after the Stated Maturity Date of the Notes. In addition, (i) such
Substitute Contracts shall have an aggregate Collateral Value at least equal to
and not substantially greater than the aggregate Collateral Value of the
Contracts being withdrawn as of the date of withdrawal (the "Substitution
Criterion") and (ii) the representations and warranties set forth in Sections
3.01 and 3.02 shall be true and correct with respect to such Substitute Contract
and the aggregate pool of Contracts as of the date such Substitute Contract is
conveyed to TFI.
-14-
<PAGE> 18
Upon the substitution of any Substitute Contract pursuant to the
provisions of this Section 3.04(b), Trendwest hereby agrees that such Substitute
Contract will be subject to all the terms and provisions of this Agreement, the
Sale Agreement, the Servicing Agreement, the Custodian Agreement and the
Indenture just as if such Substitute Contract had been one of the original
Contracts acquired on the Closing Date. Upon the substitution of a Substitute
Contract pursuant to this Section 3.04(b), TFI and Trendwest shall also comply
with the provisions and limitations set forth in the Indenture. All
substitutions shall be accomplished at the time specified in subsection (c)
below.
(c) Any purchase or substitution of a Contract by Trendwest in
accordance with Section 3.03 hereof or this Section 3.04 or by TFI or Trendwest
under Section 3.03 or Section 3.04 of the Sale Agreement shall be made either by
remittance of the Purchase Price to the Subservicer for deposit into the
Clearing Account in accordance with Section 3.03(a) of the Servicing Agreement
or by substitution of a Substitute Contract, as applicable, within one Business
Day following the expiration of the cure period set forth in Section 3.03
hereof.
(d) If an Obligor desires to enter into an Upgrade Contract, Trendwest,
as Servicer, shall inform the Issuer of such fact. In such event, if the Issuer
desires to enter into such Upgrade and so advises Trendwest, Trendwest for the
benefit of the Issuer may (but shall not be obligated to) enter into an Upgrade
Contract with such Obligor and transfer such Upgrade Contract to TFI for
transfer to the Issuer in exchange for the existing Contract with such Obligor
and an amount equal to the difference in the principal balance between the
existing Contract and the Upgrade Contract (which amount shall be paid to
Trendwest by increasing the amount owed by TFI under the intercompany debt
between TFI and Trendwest); provided, however, that (i) such Upgrade Contract
has an interest rate that is not more than 1.0% per annum lower than the
interest rate on the Contract that is being replaced, (ii) each Scheduled
Payment under the Upgrade Contract shall be the equal to or greater than the
Scheduled Payments on the existing Contract, (iii) such Obligor has made all
Scheduled Payments due on or before the date of such Upgrade, (iv) such Upgrade
Contract is written on one of the standard forms attached as Exhibit A to this
Agreement, (v) simultaneous with the execution of the Upgrade Contract,
Trendwest shall execute a form of assignment to TFI attached to such Upgrade
Contract, and indicate on the face of the Upgrade Contract that such contract is
being sold to TFI, so that TFI can immediately execute an assignment to the
Issuer and be pledged to the Trustee pursuant to the Indenture, (vi) such
Upgrade Contract shall be delivered by Trendwest to the Custodian immediately
after execution of such contract by the Obligor, WorldMark and Trendwest (and,
in any event, prior to the release of the original Contract), (vii) the transfer
of the Upgrade Contract shall not be effective (and the lien of the Trustee on
the existing Contract and the related Receivable shall not be released) until
after any applicable rescission period has expired and (viii) clauses (i)-(vii)
above shall be representations and warranties of Trendwest, and Trendwest shall
be obligated to purchase from the Issuer any Upgrade Contract that does not
comply with such representations and warranties. Simultaneous with the delivery
of such Upgrade Contract to the Custodian, Trendwest shall deliver to the
Trustee a supplement to this Agreement substantially in the form of Annex A
hereto
-15-
<PAGE> 19
subjecting such Contract to the provisions hereof and providing with respect to
such Upgrade Contract the information required on the Contract Schedule.
Upon the acquisition by TFI and, subsequently, the Issuer of any
Upgrade Contract pursuant to the provisions of this Section 3.04(d), Trendwest
hereby agrees that such Upgrade Contract will be subject to all the terms and
provisions of this Agreement, the Sale Agreement, the Servicing Agreement and
the Indenture just as if such Upgrade Contract had been one of the original
Contracts acquired on the Closing Date.
ARTICLE 4
SELLER COVENANTS
Section 4.01. Seller Covenants. Each Seller hereby covenants and agrees
with TFI as follows:
(a) Except as hereinafter provided, such Seller will keep in
full effect its existence, rights and franchises as a corporation, and
will obtain and preserve its qualification to do business as a foreign
corporation in each jurisdiction in which such qualification is or
shall be necessary to protect the validity and enforceability of this
Agreement or any of the Contracts and to perform its duties hereunder.
Any person into which such Seller may be merged or consolidated, or to
whom such Seller has sold substantially all of its assets, or any
corporation resulting from any merger, conversion or consolidation to
which such Seller shall be a party, or any Person succeeding to the
business of such Seller shall be the successor of such Seller
hereunder, without the execution or filing of any paper or any further
act on the part of any of the parties hereto, anything herein to the
contrary notwithstanding; provided, however, that (w) immediately after
giving effect to such transaction, no representation or warranty made
pursuant to Section 3.01(c) hereof shall have been breached, (x) such
successor executes an agreement of assumption, in form reasonably
satisfactory to the Trustee, to perform every obligation under this
Agreement, (y) such Seller shall have delivered to TFI a certificate of
an officer of such Seller and an Opinion of Counsel each stating that
such consolidation, merger, or succession and such agreement of
assumption complies with this Section 4.01 and that all conditions
precedent, if any, provided for in this Agreement relating to such
transaction have been complied with, and (z) such Seller shall have
delivered to TFI an Opinion of Counsel either (1) stating that, in the
opinion of such counsel, all financing statements and continuation
statements and amendments thereto have been executed and filed that are
necessary fully to preserve and protect the interest of TFI in the
Contracts and reciting the details of such filings, or (2) stating
that, in the opinion of such counsel, no such action shall be necessary
to preserve and protect such interest.
(b) Neither such Seller nor any of the directors, officers,
employees or agents of such Seller shall be under any liability to TFI,
the Trustee or the Holders of Notes for any action taken or for
refraining from the taking of any action in good
-16-
<PAGE> 20
faith pursuant to this Agreement, or for errors in judgment not
involving recklessness or negligence; provided, however, that this
provision shall not protect such Seller against any breach of
warranties or representations made herein, or failure to perform its
obligations in strict compliance with this Agreement, or any liability
which would otherwise be imposed by reason of any breach of the terms
and conditions of this Agreement. Such Seller, and any director,
officer, employee or agent of such Seller, may rely in good faith on
any document of any kind prima facie properly executed and submitted by
any Person respecting any matters arising hereunder. Such Seller shall
not be under any obligation to appear in, prosecute, or defend any
legal action that is not incidental to its obligations as the seller of
the Assets under this Agreement and that in its opinion may involve it
in any expense or liability.
(c) Such Seller will from time to time, at its own expense,
execute and file such additional financing statements (including
continuation statements) as may be necessary or which the Trustee may
deem appropriate to preserve the security interests and liens described
in Section 3.01(a)(viii) hereof and are reasonably satisfactory in form
and substance to TFI and the Issuer.
(d) Such Seller will not change its name, identity or
corporate structure in any manner that would, could, or might make any
financing statement or continuation statement misleading within the
meaning of section 9-402(7) of the UCC, unless it shall have given TFI,
the Issuer and the Trustee at least 30 days' prior written notice
thereof.
(e) Such Seller will give TFI, the Issuer and the Trustee at
least 30 days' prior written notice of any relocation of its principal
executive office if, as a result of such relocation, the applicable
provisions of the UCC would require the filing of any amendment of any
previously filed financing or continuation statement or of any new
financing statement.
(f) Such Seller will duly fulfill all obligations on its part
to be fulfilled under or in connection with each Contract, will not
change or modify the terms of the Contracts (and shall prevent any
third-party originator that still owns any Contract from changing or
modifying the terms of any such Contract) except as expressly permitted
by the terms of the Transaction Documents and will do nothing to impair
the rights of TFI, the Issuer or the Trustee in the Assets. In the
event that the rights of such Seller under any Contract or any guaranty
of the related Obligor's obligations under any Contract are not
assignable to TFI or the Issuer, such Seller will enforce such rights
on behalf of TFI or the Issuer; the Seller is not aware of any such
inability to assign any Contracts.
(g) Such Seller will comply, in all material respects, with
all material acts, rules, regulations, orders, decrees and directions
of any governmental authority applicable to the Assets or any part
thereof; provided, however, that such Seller may contest any act,
regulation, order, decree or direction in any reasonable manner which
-17-
<PAGE> 21
shall not materially and adversely affect the rights of TFI, the Issuer
or the Trustee in the Assets.
(h) Such Seller will advise TFI, the Issuer and the Trustee
promptly, in reasonable detail, of the occurrence of any breach by such
Seller following discovery by such Seller of such breach of any of its
representations, warranties and covenants contained herein.
(i) Such Seller will execute or endorse, acknowledge, and
deliver to TFI, the Issuer and the Trustee from time to time such
schedules, confirmatory assignments, conveyances, and other
reassurances or instruments and take such further similar actions
relating to the Assets, and the rights covered by the Transaction
Documents, as TFI, the Issuer or the Trustee may reasonably request to
preserve and maintain title to the Assets and the rights of the Trustee
and the Holders of Notes therein against the claims of all persons and
parties.
(j) Trendwest agrees to indemnify, defend and hold TFI
harmless from and against any and all loss, liability, damage, judgment,
claim, deficiency or expense (including interest, penalties, reasonable
attorney's fees and amounts paid in settlement) that is caused by (i) a
material breach at any time by any Seller of its representations,
warranties and covenants contained in Section 3.01 hereof or this
Section 4.01 or (ii) any material information furnished by any Seller
which is set forth in any schedule delivered hereunder, being untrue in
any material respect when any such representation was made or schedule
delivered, provided that Trendwest shall not have any liability with
respect to a representation or warranty as to any specific Contract,
Receivable or the related Credits other than to purchase such Contract
or substitute for such Contract in accordance with Section 3.03 hereof
unless such breach of representation or warranty is the result of a
Seller's fraud, negligence, bad faith or willful misconduct. Trendwest
shall also indemnify the Issuer, the Trustee and the Servicer for any
cost or expenses incurred by them in the enforcement of this Agreement.
The obligations of Trendwest under this Section 4.01(j) shall be
considered to have been relied upon by TFI and shall survive the
execution, delivery and performance of this Agreement, regardless of any
investigation made by or on behalf of TFI, until termination of the
Indenture. If Trendwest has made any indemnity payments pursuant to this
Section 4.01(j) and thereafter the recipient collects any of such
amounts from others, such party will promptly repay the amount collected
to Trendwest, without interest.
(k) Such Seller will do nothing to disturb or impair the
acquisition hereunder by TFI of all of such Seller's right, title and
interest in the Assets or the Issuer's rights, title or interest in the
Purchased Assets.
(l) Such Seller (i) will (A) maintain its books and records
separate from the books and records of TFI and (B) maintain bank
accounts separate from those of TFI and (ii) will not (x) take, prior
to the complete payment of the Notes, any action that would cause the
dissolution or liquidation of TFI, (y) guarantee (directly or
-18-
<PAGE> 22
indirectly), endorse or otherwise become contingently liable (directly
or indirectly) for the obligations of TFI or (z) institute against TFI,
or join any other person in instituting against TFI, any case,
proceeding or other action under any existing or future bankruptcy,
insolvency or similar laws.
(m) Such Seller shall notify TFI, the Issuer and the Trustee
promptly after becoming aware of any Lien on any Asset.
(n) On each date as of which Trendwest substitutes a
Substitute Contract in accordance with Section 3.03 hereof, Trendwest
shall provide to TFI a supplement to this Agreement substantially in
the form of Annex A hereto subjecting such Contract to the provisions
hereof and providing with respect to such Substitute Contract the
information required in the Contract Schedule.
(o) The annual financial statements of such Seller will
disclose the effects of the transactions contemplated by the
Transaction Documents in accordance with generally accepted accounting
principles. The financial statements of such Seller and TFI will also
disclose that the assets of TFI are not available to pay creditors of
such Seller. The resolutions, agreements and other instruments
underlying the Transaction Documents will be continuously maintained by
such Seller as official records.
(p) Such Seller will, at its own cost and expense, (i) retain
the Electronic Ledger as a master record of the Contracts and the
related Credits and copies of all documents relating to each Contract
(other than the original executed Contracts) as custodian for the
Issuer and other Persons, if any, with interests in the Contracts and
the related Credits and (ii) mark the Contracts and the Electronic
Ledger to the effect that the Contracts and such Seller's interest in
the related Credits have been acquired by TFI, that the Contracts and
the related Receivables subsequently have been transferred by TFI to
the Issuer and a security interest in the related Credits have been
granted by TFI to the Issuer and that such Receivables, security
interests and rights have been pledged, transferred and assigned to the
Trustee by the Issuer pursuant to the Indenture.
(q) Such Seller will perform the transactions contemplated by
this Agreement in a manner that is consistent with TFI's ownership
interest in the Assets (prior to the conveyance of any part of such
interest to the Issuer pursuant to the Sale Agreement). Such Seller
will respond to all third party inquiries confirming the transfer of
the Assets to TFI and of the Purchased Assets to the Issuer.
(r) Such Seller shall immediately transfer to the Servicer for
deposit in the Clearing Account any payment it receives relating to the
Assets.
Section 4.02. TFI Covenants. TFI hereby covenants and agrees with the
Sellers as follows:
-19-
<PAGE> 23
(a) TFI hereby acknowledges and agrees that its rights in the
related Credits are expressly subject to the rights of the related
Obligors in such Credits pursuant to the applicable Contract.
(b) On each date as of which any interest in any Contract is
to be purchased or replaced by Trendwest pursuant to Section 3.03
hereof, TFI shall submit to Trendwest an instrument of assignment
assigning TFI's interest in such Contract and the related Credits to
Trendwest, signed by the president, senior vice president or any vice
president of TFI. Each such assignment shall operate as an assignment,
without recourse, representation, or warranty, to Trendwest of all of
TFI's right, title, and interest in and to such Contract, related
Credits and any security documents relating thereto, such assignment
being an assignment outright and not for security, and upon payment of
the Purchase Price or delivery of a Substitute Contract, Trendwest will
thereupon own such interest in the Contract and all such security and
documents, free of any further obligation to TFI with respect thereto.
If in any enforcement suit or legal proceeding it is held that
Trendwest may not enforce a Contract on the ground that it is not a
real party in interest or holder entitled to enforce the Contract, TFI
shall, at TFI's expense, take such steps as TFI deems necessary to
enforce the Contract, including bringing suit in TFI's name.
(c) TFI warrants that, except as contemplated by the
Transaction Documents, it will have ownership of or a valid security
interest in the related Credits. TFI shall not assign, sell, pledge, or
exchange, or in any way encumber or otherwise dispose of the related
Credits, except as contemplated by or permitted under the Transaction
Documents.
Section 4.03. Assignment of Assets. The Sellers understand that TFI
will assign to the Issuer the Receivables and grant to the Issuer a security
interest in all its right, title and interest to this Agreement, the Contracts
and the related Credits and that the Issuer will assign to and grant to the
Trustee a security interest in such Receivables, Contracts and the related
Credits. The Sellers consent to such assignments and grants and further agree
that all representations, warranties, covenants and agreements the Sellers made
herein shall also be for the benefit of and inure to the Issuer, the Trustee and
all Holders from time to time of the Notes.
ARTICLE 5
CONDITIONS PRECEDENT
Section 5.01. Conditions to TFI's Initial Obligations. The obligations
of TFI to execute and deliver the Asset Assignment to the Sellers on the Closing
Date pursuant to, and perform it obligations pursuant to, this Agreement shall
be subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Sellers
contained in Sections 3.01(b) and 3.01(c) hereof and all information
provided in the Contract
-20-
<PAGE> 24
Schedule shall be true and correct on the Closing Date, with the same
effect as though such representations and warranties had been made on
such date, and the Sellers shall have delivered to TFI, the Issuer, the
Trustee and each original purchaser of Notes an Officer's Certificate
to such effect;
(b) All representations and warranties of the Sellers
contained in Section 3.01(a) hereof shall be true and correct on the
Closing Date with respect to the Contracts listed on the Contract
Schedule, with the same effect as though such representations and
warranties had been made on such date, and the Sellers shall have
delivered to TFI, the Issuer, the Trustee and each original purchaser
of Notes an Officer's Certificate to such effect;
(c) The Sellers shall have delivered all other information
theretofore required or reasonably requested by TFI to be delivered by
the Sellers hereunder, duly certified by an officer of each of the
Sellers, and the Sellers shall have substantially performed all other
obligations required to be performed as of the Closing Date by the
provisions of this Agreement;
(d) On or prior to the Closing Date, Trendwest, on behalf of
the Sellers shall have delivered, or caused the delivery of, the
Custodian File related to the Contracts identified in the Contract
Schedule to the Custodian or its agent and, subject to Section 2.04
hereof, there shall have been made all filings, recordings and/or
registrations, and there shall have been given, or taken, any notice or
any other similar action, as may be necessary in the opinion of TFI, in
order to establish and preserve the right, title and interest of TFI in
such Contract and the other Assets;
(e) On or before the Closing Date, the Issuer, the Servicer,
the Subservicer and the Trustee shall have entered into the Servicing
Agreement;
(f) The Notes shall be issued and sold on the Closing Date,
the Issuer shall receive the full consideration due it upon the
issuance of the Notes, the Issuer shall have applied such
consideration, to the extent necessary, to pay the related
consideration to TFI for the sale of the Contracts and the Receivables
and the grant of the security interest in the Credits, and TFI shall
have applied such consideration, to the extent necessary, to pay the
related Acquisition Consideration; and
(g) Each of the Sellers shall have executed and delivered the
Asset Assignment.
Section 5.02. Conditions to the Sellers' Obligations. The obligations
of each of the Sellers to execute and deliver to TFI the Asset Assignment, and
perform its obligations pursuant to this Agreement on the Closing Date shall be
subject to the satisfaction of the following conditions:
-21-
<PAGE> 25
(a) All representations and warranties of TFI contained in
this Agreement shall be true and correct with the same effect as though
such representations and warranties had been made on such date;
(b) TFI shall have executed and delivered the Asset
Assignment; and
(c) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall
be satisfactory in form and substance to such Seller, and such Seller
shall have received from the TFI copies of all documents (including,
without limitation, records of corporate proceedings) relevant to the
transactions herein contemplated as such Seller may reasonably have
requested.
Trendwest's and TFI's obligations to repurchase the Contracts pursuant
to this Agreement shall not be affected by any failure of the Issuer to comply
with clause (a) of this Section 5.02 subsequent to the Closing Date.
ARTICLE 6
TERM AND TERMINATION
Section 6.01. Term. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the later of (i) payment with respect to the last Asset or (ii) termination of
the Indenture.
Section 6.02. Default by Sellers. If either Seller shall be in default
under this Agreement and such default shall not have been cured for a period of
60 days, or if such Seller shall become insolvent or make an assignment for the
benefit of its creditors or have a receiver appointed for all or substantially
all of its properties, or if any proceedings commenced, or consented to, by such
Seller are not stayed or dismissed within 90 days after being commenced against
such Seller under any bankruptcy, insolvency or other law for the relief of
debtors, TFI shall have the right, in addition to any other rights it may have
under any applicable law, to terminate this Agreement with respect to such
Seller upon 30 days' prior written notice to such Seller; provided that any
termination of this Agreement shall not release such Seller from any obligation
under this Agreement.
ARTICLE 7
MISCELLANEOUS
Section 7.01. Amendments. This Agreement and the rights and obligations
of the parties hereunder may not be changed orally but only by an instrument in
writing signed by the party against which enforcement is sought. This Agreement
may be amended by TFI and the Sellers only with the prior written consent of the
Holders of 66-2/3% in principal amount of Notes Outstanding.
-22-
<PAGE> 26
Section 7.02. Governing Law. This Agreement shall be construed in
accordance with the internal laws of the State of New York, without regard to
choice of law principles.
Section 7.03. Notices. All demands, notices and communications
hereunder shall be in writing and shall be delivered personally, mailed by
registered or certified United States mail, postage prepaid, or sent via
overnight air courier or facsimile communication and addressed, in the case of
the Sellers, to the Seller Address, and in the case of TFI, to the TFI Address.
All notices and demands shall be deemed to have been given either at the time of
the delivery thereof to any officer of the Person entitled to receive such
notices and demands at the address of such Person for notices hereunder, or on
the third day after the mailing thereof to such address, as the case may be. Any
Person may change the address for notices hereunder by giving notice of such
change to the other Person.
Section 7.04. Separability Clause. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 7.05. Assignment. Except as provided in Section 4.01(a), this
Agreement may not be assigned or delegated by any Seller without the prior
written consent of TFI, the Trustee and the Holders of 66-2/3% in principal
amount of the Notes Outstanding and may not be assigned or delegated by TFI
without the prior written consent of each of the Sellers, the Trustee and the
Holders of 66-2/3% in principal amount of the Notes Outstanding.
Section 7.06. Further Assurances. Each of the Sellers and TFI agrees to
do such further acts and things and to execute and deliver to the Trustee such
additional assignments, agreements, powers and instruments as are required by
the Trustee to carry into effect the purposes of this Agreement or to better
assure and confirm unto the Trustee or the Holders of the Notes their rights,
powers or remedies hereunder. If any Obligor shall be in default under any
Contract, upon reasonable request from the Servicer, the applicable Seller will
take all reasonable steps to assist in enforcing such Contract and preserving
and maintaining title to the Assets and the rights of the Trustee and the
Holders of the Notes therein against the claims of all persons and parties to
the extent the applicable Seller is capable of performing such requested steps
and the Servicer reasonably determines that the assistance of the applicable
Seller is necessary to effect the intent and purposes hereof.
Section 7.07. No Waivers; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of TFI or the Sellers, any right,
remedy, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise of any right, remedy, or privilege hereunder
preclude any other or further exercise hereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein provided are cumulative and not exhaustive of any rights, remedies,
powers and privileges provided by law.
-23-
<PAGE> 27
Section 7.08. Binding Effect; Third Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the parties hereto,
the Holders of Outstanding Notes, and their respective successors and permitted
assigns.
Section 7.09. Set-Off. (a) Each of the Sellers hereby irrevocably and
unconditionally waives all right of set-off that it may have under contract
(including this Agreement), applicable law or otherwise with respect to any
funds or monies of TFI and the Issuer at any time held by or in the possession
of such Seller.
(b) TFI and the Issuer shall have the right to set-off against each
Seller any amounts to which such Seller may be entitled and to apply such
amounts to any claims TFI and the Issuer may have against such Seller from time
to time under this Agreement. Upon any such set-off TFI shall give notice of the
amount thereof and the reasons therefor.
Section 7.10. Counterparts. This Agreement may be executed in one or
more counterparts all of which together shall constitute one original document.
-24-
<PAGE> 28
IN WITNESS WHEREOF, the Sellers and TFI have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the date and year first above written.
TRENDWEST RESORTS, INC., in its
individual capacity and
as Seller
By______________________________________
Name:
Title:
TW HOLDINGS, INC., Seller
By______________________________________
Name:
Title:
TRENDWEST FUNDING I, INC.
By _____________________________________
Name:
Title:
-25-
<PAGE> 29
ANNEX A
FORM OF SUPPLEMENT FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
Pursuant to Section 3.04(b) and Section 3.04(d) of the Receivables
Purchase Agreement dated as of March 1, 1996 (the "Agreement"), among Trendwest
Resorts, Inc. ("Trendwest"), TW Holdings, Inc. and Trendwest Funding I, Inc.
("TFI"), attached as Schedule I hereto is a Supplemental Contract Schedule,
which includes information regarding Assets that are hereby sold, assigned,
transferred and delivered by Trendwest to TFI in accordance with the Agreement
and the Asset Assignment and setting forth the Collateral Value of any Contract
being sold to TFI by the Issuer pursuant to an Upgrade or exchanged pursuant to
a substitution.
TRENDWEST RESORTS, INC.
By______________________________________
Name:
Title:
<PAGE> 30
SCHEDULE I
SUPPLEMENTAL CONTRACT SCHEDULE FOR SUBSTITUTE CONTRACTS
AND UPGRADE CONTRACTS
<PAGE> 31
EXHIBIT A
FORM OF CONTRACT
<PAGE> 32
EXHIBIT B
FORM OF ASSET ASSIGNMENT
This Asset Assignment ("Assignment") is made as of April 17, 1996 (the
"Closing Date"), by and among Trendwest Resorts, Inc., an Oregon corporation
("Trendwest"), TW Holdings, Inc., a Nevada corporation, (together with
Trendwest, the "Assignors" and each an "Assignor") and Trendwest Funding I,
Inc., a Delaware corporation ("Assignee"), with reference to the following
facts:
RECITALS:
A. In connection with the sale of certain assets of the Assignors in
conjunction with the issuance of notes on the date hereof by TRI Funding Company
I, L.L.C., Assignee and the Assignors have executed the Receivables Purchase
Agreement dated as of March 1, 1996 (the "Agreement").
B. In connection with the Agreement, each of the Assignors desires to
assign and transfer to Assignee all of such Assignor's right, title and interest
in and to each of the assets described in Schedule I hereto, and the
corresponding paragraphs below (the "Assigned Interests").
C. Assignee desires to accept this Assignment and transfer of the
Assigned Interests and assume all duties and obligations attendant thereto,
accruing after the Transfer Date.
D. Terms used but not defined herein have the meanings ascribed to them
in the Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration of the mutual
covenants set forth herein, the Assignors and Assignee hereby agree as follows:
1. Assignment. Each Assignor hereby assigns, conveys, grants and
transfers, without recourse except as provided in the Agreement, to Assignee
(and the successors and assigns of Assignee) the following property:
1.1. Such Assignor's right, title and interest in and to the
Contracts and related Receivables described and listed on Schedule I
hereto.
1.2. A security interest in the vacation credits subject to
each such Contract (the "Credits").
1.3. All other Assets relating to such Contract.
<PAGE> 33
2. Assumption. Assignee hereby accepts the foregoing assignment and
hereby assumes all of the duties and obligations incident hereto and thereto,
subject to the terms and conditions of the Agreement.
3. Further Assurance. The Assignors and Assignee each hereby agree to
provide such further assurances and to execute and deliver such documents and to
perform all such other acts as are necessary or appropriate to consummate and
effectuate this Assignment.
4. Distinct Entities. The Assignors and Assignee hereby acknowledge
that for all purposes each of the Assignors and the Assignee are separate and
distinct legal entities. Accordingly, no Assignor shall be liable to any third
party for the debts, obligations and liabilities of the Assignee; and Assignee
shall not be liable to any third party for the debts, obligations and
liabilities of any Assignor to the extent that such debts, obligations and
liabilities have not been expressly assumed by Assignee hereunder.
5. Governing Law. This Assignment shall be governed by and interpreted
in accordance with the laws of the State of New York, and the parties hereto
hereby acknowledge and agree that this Assignment and the transactions
contemplated hereunder were negotiated and entered into in the State of New
York.
6. Authority. Each of the Assignors and the Assignee hereby represent
respectively that they have full power and authority to enter into this
Assignment.
7. Counterparts. This Assignment may be executed in multiple
counterparts, each of which shall be deemed an original but all of which, taken
together, shall constitute one and the same instrument.
8. Successors and Assigns. Each of the Assignors and the Assignee agree
that this Assignment will be binding and will inure to the benefit of each
Assignor and its successors and assigns and the Assignee and its successors and
assigns.
B-2
<PAGE> 34
IN WITNESS WHEREOF, this Assignment has been executed as of the date
first above written.
TRENDWEST RESORTS, INC., Assignor
By______________________________________
Name:
Title:
TW HOLDINGS, INC., Assignor
By______________________________________
Name:
Title:
TRENDWEST FUNDING I, INC., Assignee
By______________________________________
Name:
Title:
B-3
<PAGE> 35
SCHEDULE I
CONTRACT SCHEDULE
<PAGE> 1
EXHIBIT 10.11
LOAN AND SECURITY AGREEMENT
LOAN AND SECURITY AGREEMENT ("Agreement") entered into as of May
5, 1993, by GREYHOUND FINANCIAL CORPORATION, a Delaware corporation ("Lender"),
and TRENDWEST RESORTS, INC., an Oregon corporation ("Borrower").
I. DEFINITIONS
As used in this Agreement and the other Documents (as defined
below) unless otherwise expressly indicated in this Agreement or
the other Documents, the following terms shall have the following
meanings (such meanings to be applicable equally both to the
singular and plural terms defined).
1.1 "Advance": an advance of the proceeds of the Loan by
Lender on behalf of Borrower in accordance with the terms
and provisions of this Agreement.
1.2 "Affiliate": with respect to Borrower or any Guarantor,
each person who or which, as to such entity, is now or
hereafter an "affiliated company" or an "affiliated
person" within the meaning of the Investment Companies
Act of 1940 (15 U.S.C. Section 8OA-1, et seq.).
1.3 "Agents": the Servicing Agent, the Lockbox Agent and the
Custodial Agent.
1.4 "Agreement": this Agreement, together with any and all
renewals, amendments, restatements or replacements of it.
1.5 "Applicable Usury Law": the usury law chosen by the
parties pursuant to the terms of paragraph 8.10 or such
other usury law which is applicable if such usury law is
not.
1.6 "Articles of Organization": the charter, articles, by-
laws, agreements and other written documents evidencing
the formation, organization and continuing existence of
an entity.
1.7 "Assignment": a written assignment of specific
Instruments and their proceeds, delivered by Borrower to
Lender in the form of Exhibit A.
1.8 "Borrowing Base": with respect to an Eligible Instrument,
an amount equal to the lesser of:
(a) eighty-five percent (85%) of the unpaid principal
balance of such Eligible Instrument; or
(b) ninety percent (90%) of the present value of the
unmatured installments of principal and interest
-1-
<PAGE> 2
such Eligible Instrument, discounted at the
applicable interest rate under the terms of
the Note.
1.9 "Borrowing Term": the period commencing on the date
of this Agreement and ending on the close of
Lender's normal business hours on the date (or if
not a Business Day, the first Business Day
thereafter) which is the earlier of (a) the date
twelve (12) months from the date of the first
Advance or (b) April 30, 1994.
1.10 "Business Day": any day other than a Saturday,
Sunday or a day on which banks in Phoenix, Arizona
are required to close.
1.11 "Commitment Fee": a commitment fee for the Loan
payable by Borrower to Lender in the amount of
$50,000.00.
1.12 "Custodial Agent": Sage Systems, Inc., a Washington
corporation, or its successor as Custodial Agent
under the Custodial Agreement.
1.13 "Custodial Agreement": an agreement in form and
substance satisfactory to Lender in its sole and
absolute discretion, to be made among Lender,
Borrower and Custodial Agent, which provides for
Custodial Agent to hold certain original and
photocopied documents constituting part of the
Receivables Collateral, together with any and all
renewals, amendments, restatements or replacements
of it.
1.14 "Default Rate": as defined in the Note.
1.15 "Documents": the Note, the Guarantee, the
Assignment, the Lockbox Agreement, the Servicing
Agreement, the Custodial Agreement, the
Environmental Certificate, the Subordination
Agreement(s), this Agreement and all other
documents executed in connection with the Loan,
together with any and all renewals, amendments,
restatements or replacements of such documents.
1.16 "Eligible Instrument": an Instrument which conforms
to the standards set forth in EXHIBIT B. An
Instrument that has qualified as an Eligible
Instrument shall cease to be an Eligible Instrument
upon the date of the first occurrence of any of the
following: (a) any installment due with respect to
that Instrument becomes more than fifty-nine (59)
days past due or (b) that Instrument otherwise
fails to continue to conform to the standards set
forth in EXHIBIT B.
1.17 "Environmental certificate": an environmental
certificate executed by Borrower and such other
persons or parties as required by Lender in the
form of EXHIBIT C, together
-2-
<PAGE> 3
with any and all renewals, amendments, restatements
or replacements of it.
1.18 "Event of Default": the meaning set forth in
paragraph 7.1 .
1.19 "Guarantee": the guarantee made by the Guarantor of
the Obligations and the subordination by Guarantor
to the Obligations, together with any and all
renewals, amendments, restatements or replacements
of it.
1.20 "Guarantor": Trendwest, Inc.
1.21 "Incipient Default": an event which after notice
and/or lapse of time would constitute an Event of
Default.
1.22 "Instrument": a Vacation Club owner Agreement
entered into between Borrower, as seller, and a
Purchaser, as buyer, for the sale and purchase of a
Time-Share Interest.
1.23 "Insurance Policies": such insurance policies
required by Lender, written by insurers and in
amounts and upon forms satisfactory to Lender, and
to be delivered to Lender, all consistent with
those requirements set forth in the certain letter
dated February 9, 1993, from Linda C. Thomas to
Jeffrey P. Sites.
1.24 "Loan": the loan made pursuant to this Agreement
and the other Documents.
1.25 "Lockbox Agent": First Interstate Bank of
Washington, N.A., or its successor as lockbox agent
under the Lockbox Agreement.
1.26 "Lockbox Agreement": an agreement in form and
substance satisfactory to Lender in its sole and
absolute discretion to be made between Lender,
Borrower and Lockbox Agent, which provides for the
Lockbox Agent to collect through a lockbox payments
made on Instruments constituting part of the
Receivables Collateral and to remit them to Lender,
together with any and all renewals, amendments,
restatements or replacements of it.
1.27 "Maturity Date": the date (or if not a Business
Day, the first Business Day thereafter) eighty-four
(84) months after the date of the last Advance.
1.28 "Maximum Loan Amount": Five Million United States
Dollars ($5,000,000.00).
1.29 "Note": the "Promissory Note" issued by Borrower
in the form of EXHIBIT D to evidence the Loan,
together with any
-3-
<PAGE> 4
and all renewals, amendments, restatements or
replacements of it.
1.30 "Obligations": all obligations, agreements, duties,
covenants and conditions that Borrower is now or
hereafter required to Perform under the Documents.
1.31 "Opening Prepayment Date": the date (or if not a
Business Day, the first Business Day thereafter)
two (2) years after the date of the last Advance.
1.32 "OPERF": Oregon Public Employees' Retirement Fund.
1.33 "OPERF Debt": the indebtedness owing by Borrower to
OPERF pursuant to a revolving loan agreement (as
renewed, modified, restated or replaced, "OPERF
Loan Agreement") providing for a line of credit
loan to Borrower, and other documents now or
hereafter evidencing, securing or otherwise
pertaining to borrowings obtained pursuant to the
OPERF Loan Agreement.
1.34 "Owner": an owner of a Time-Share Interest.
1.35 "Performance" or "Perform": full, timely and
faithful performance.
1.36 "Permitted Encumbrances": the rights, restrictions,
reservations, encumbrances, easements and liens of
record which Lender has agreed to accept as set
forth in EXHIBIT E.
1.37 "Prepayment Premium": an amount equal to (a) six
percent (6.0%) of the outstanding principal balance
of the Loan in the event of a prepayment of the
Loan occurring prior to the Opening Prepayment Date
or (b) a percent, determined in accordance with
Schedule 1, of the outstanding principal balance of
the Loan in the event of a prepayment of the Loan
occurring subsequent to the Opening Prepayment
Date.
1.38 "Project": a resort or part of a resort in which a
Vacation Club Unit is located, a current list of
all Projects being set forth as EXHIBIT F.
1.39 "Project Declaration": with respect to a Project,
the recorded document(s) pursuant to which the
Project and its common scheme are established and
governed.
1.40 "Project Governing Documents": with respect to a
Project, the Project Declaration, the Articles of
Organization for any Project Owner Association, and
any rules and regulations adopted by such entity or
entities pertaining to the use of the Project.
-4-
<PAGE> 5
1.41 "Project Owners Association": with respect to any
Project, an entity or entities in which the fee
simple owners and/or owners of other legal estates
are members and which has been established to
govern the Project in accordance with the recorded
documents establishing the Project and its common
scheme.
1.42 "Purchaser": a purchaser of a Time-Share Interest
from Borrower.
1.43 "Receivables Collateral": (a) the Instruments which
are now or hereafter assigned, endorsed or
delivered to Lender pursuant to this Agreement or
against which an Advance has been made; (b) all
rights under all documents evidencing, securing or
otherwise pertaining to such Instruments; (c) the
Insurance Policies in which Borrower has an
interest; (d) all rights under any and all escrow
agreements and accounts pertaining to the foregoing
or to the Time-Share Interests and related Vacation
Club Credits sold pursuant to the Instruments and
their proceeds; (e) the Vacation Club Reservation
System; (f) all files, books and records of
Borrower pertaining to the foregoing; and (g) the
proceeds from the foregoing.
1.44 "Resolutions": the corporate resolution of a
corporation certified as true and correct by an
authorized officer of such corporation or a
partnership certificate signed by all of the
general partners of such partnership.
1.45 "Security Interest": a perfected, direct and
exclusive first priority security interest in and
charge upon the property intended to be covered by
it.
1.46 "Servicing Agent": Sage Systems, Inc., a
Washington corporation, or its successor as
Servicing Agent under the Servicing Agreement.
1.47 "Servicing Agreement": an agreement in form and
substance satisfactory to Lender in its sole and
absolute discretion, to be made among Lender,
Borrower and Servicing Agent, which provides for
Servicing Agent to perform for the benefit of
Lender accounting, reporting and other servicing
functions with respect to the Instruments
constituting part of the Receivables Collateral,
together with any and all renewals, amendments,
restatements or replacements of it.
1.48 "Subordination Agreement(s)": the subordination
agreement(s) made and delivered to Lender pursuant
to paragraph 6.11.
1.49 "Term": the duration of this Agreement, commencing
on the date as of which this Agreement is entered
into and
-5-
<PAGE> 6
ending when all of the Obligations shall have been
Performed.
1.50 "Time-Share Interest": at membership in the
Vacation Club Association and Vacation Club
Credits, which entitle an Owner to temporary,
periodic use of the Vacation Club Units pursuant to
the Vacation Club Program during a term of not less
than forty (40) consecutive years.
1.51 "Title Assurances": a policy of title insurance
written in amounts, and upon forms, all reasonably
satisfactory to Lender, to evidence that the
Vacation Club Association holds good and marketable
title to the Vacation Club Units, subject only to
the Permitted Encumbrances and the Vacation Club
Declarations,
1.52 "Vacation Club Association": means WorldMark, The
Club, a nonprofit, mutual benefit corporation
organized under the laws of the State of
California, and formerly known as Club Esprit.
1.53 "Vacation Club Credits": the term of measurement
currently utilized by the Vacation Club Association
to measure the magnitude and extent of benefits and
obligations of an Owner as a member of the Vacation
Club Association.
1.54 "Vacation Club Declaration": a declaration which is
executed by Vacation Club Association and Borrower
dedicating a unit or units in a Project to the
Vacation Club Program, together with any and all
renewals, amendments, restatements or replacements
of it.
1.55 "Vacation Club Governing Documents": the Articles
of Organization of Vacation Club Association, all
Vacation Club Declarations, the Vacation Club
Management Agreement, the Vacation Club Program
Agreement, the Vacation Club Reimbursement
Agreement, and the Vacation Club Rules.
1.56 "Vacation Club Management Agreement": the
Management Agreement between Borrower and the
Association dated February 13, 1991, as amended by
instrument dated December 21, 1992, pursuant to
which Borrower manages the Vacation Club Program
described in the Vacation Club Owner Agreement and
the Vacation Club Governing Documents, together
with any and all renewals, amendments, restatements
or replacements of it.
1.57 "Vacation Club Owner Agreement": a purchase
contract and security agreement in the form
attached hereto as EXHIBIT M-1 or M-2, or such
other form as may be identical thereto in all
material respects or has been approved by Lender in
writing as contemplated by paragraph 6.4(d) by
-6-
<PAGE> 7
which a Purchaser purchases a Time-Share Interest
from Borrower.
1.58 "Vacation Club Program": the master program for the
use and enjoyment of Time-Share Interests by all
Owners based upon Vacation Club Credits allocated
to the Owners and Vacation Club Credit values
assigned to use of the Vacation Club Units,
1.59 "Vacation Club Program Agreement": the Vacation
Program Agreement (Second Amended) between Borrower
and the Vacation Club Association dated February
13, 1991, which established the rights and
obligations of the parties with respect to the
transfer of property by Borrower to the Vacation
Club Association, the sale of Vacation Club Credits
by Borrower, the encumbrance of Vacation Club Units
and the protection of Owners' use rights, together
with any and all renewals, amendments, restatements
or replacements of it.
1.60 "Vacation Club Reimbursement Agreement": the
Reimbursement Agreement (Second Amended) between
Borrower and the Vacation Club Association dated
February 13, 1991, which establishes Borrower's
obligation to pay the Vacation Club Association's
costs of operating the Vacation Club Program,
together with any and all renewals, amendments,
restatements or replacements of it.
1.61 "Vacation Club Reservation System": all computer
software, licenses, copyrights, patents, service
contracts and other contract rights and general
intangibles in which Borrower has an interest and
which are utilized in connection with maintaining
records of the availability of Vacation Club Units
and the number of unused Vacation Club credits
owned by each Owner and in handling reservations
and confirmations made by Owner for the use of
Vacation Club Credits, and the proceeds thereof.
1.62 "Vacation Club Rules": rules and regulations from
time to time adopted by Vacation Club Association
in accordance with the Vacation Club Governing
Documents and pertaining to the use of the Vacation
Club Units as part of the Vacation Club Program.
1.63 "Vacation Club Unit": a residential condominium
apartment owned by the Vacation Club Association,
together with all personal property located
therein.
1.64 "Wendts Subordination Agreement": the Subordination
Agreement by the Wendts to the Obligations with
respect to the Wendt Purchase Documents, together
with any and all renewals, amendments, restatements
or replacements of it.
-7-
<PAGE> 8
1.65 "Wendts Purchase Documents": that Purchase
Agreement dated as of December 30, 1992, between
Borrower and Eagle Crest Partnership Ltd., as
sellers, and Richard L. Wendt and Roderick C. Wendt
("Wendts"), as buyers, providing for the sale of
certain contracts receivable and promissory notes
and the Servicing Escrow Agreement dated as of
December 30, 1992, between the Wendts, Borrower,
and Sage Systems, Inc. and pertaining to the
purchased contracts receivable.
II. LOAN COMMITMENT; USE OF PROCEEDS
2.1 Lender hereby agrees, if Borrower has Performed all
of the Obligations then due, to make Advances to
Borrower. Advances shall be made against Eligible
Instruments at the time they are assigned to Lender
("Initial Availability Advances") in an amount
equal to the then Borrowing Base for such Eligible
Instruments. As Advances made against Eligible
Instruments are repaid, no additional Advances
("Additional Availability Advances") shall be made
against those same Eligible Instruments except at
the request of Borrower. If Borrower requests an
Additional Advance against previously assigned
Eligible Instruments such Advance shall be in an
amount less then or equal to the then Borrowing
Base of all previously assigned Eligible
Instruments less the aggregate unpaid principal
balance of all Advances previously made against
such Eligible Instruments. Any Advance made against
an Instrument substituted pursuant to paragraph 3.2
shall be deemed to be an Additional Availability
Advance; provided, however, that the substitution
of an Eligible Instrument for an ineligible
Instrument pursuant to paragraph 3.2 shall not be
deemed to be the making of an Initial Availability
Advance or Additional Availability Advance. Lender
shall have no obligation to make any Advance after
the Borrowing Term has expired.
2.2 The Loan is a revolving line of credit; however,
all of the Advances shall be viewed as a single
loan. Borrower shall not be entitled to obtain
Advances after the expiration of the Borrowing Term
unless Lender, in its sole and absolute discretion,
agrees in writing with Borrower to make Advances
thereafter on terms and conditions satisfactory to
Lender. This Agreement and Borrower's liability for
Performance of the Obligations shall continue,
however, until the end of the Term.
2.3 Borrower will use the proceeds of the Loan only for
Borrower's business purposes, which shall consist
of use for working capital.
-8-
<PAGE> 9
III. SECURITY
3.1 To secure the Performance of all of the
Obligations, Borrower hereby grants to Lender a
Security Interest in and assigns to Lender the
Receivables Collateral. Such Security Interest
shall be absolute, continuing and applicable to all
existing and future Advances and to all of the
Obligations. All of the Receivables Collateral
shall secure repayment of the Loan and the
Performance of the other Obligations. Borrower will
unconditionally deliver to the Custodial Agent, as
agent for Lender or as otherwise directed by
Lender, with full recourse, all Instruments which
are part of the Receivables Collateral. Lender is
hereby appointed Borrower's attorney-in-fact to
take any and all actions in Borrower's name and/or
on Borrower's behalf deemed necessary or
appropriate by Lender with respect to the
collection and remittance of payments (including
the endorsement of payment items) received on
account of the Receivables Collateral.
3.2 If a previously Eligible Instrument which is part
of the Receivables Collateral ceases to be an
Eligible Instrument, then within thirty (30) days
thereafter, Borrower will either (i) pay to Lender
an amount equal to the Borrowing Base of the
ineligible Instrument, together with interest,
costs and expenses attributable to it, or (ii)
replace such ineligible Instrument with an Eligible
Instrument or Eligible Instruments having a
Borrowing Base not less than the Borrowing Base
(calculated immediately before its ineligibility)
of the ineligible Instrument(s) being replaced.
Simultaneously with such payment or the delivery of
the replacement Instrument to Lender, Borrower will
deliver to Lender all of the items (except for a
"Request for Advance and Certification") required
to be delivered by Borrower to Lender pursuant to
paragraph 4.1, together with a "Borrower's
Certificate" in form and substance identical to
EXHIBIT G. If no Event of Default or Incipient
Default has occurred and is continuing, then within
a reasonable period of time after the substitution
of an Eligible Instrument for an ineligible
Instrument, Lender will reassign to Borrower,
without recourse or warranty of any kind, the
ineligible Instrument. Borrower will prepare the
reassignment instrument, which shall be in form and
substance identical to EXHIBIT G-1, and shall
deliver it to Lender for execution.
3.3 Borrower will deliver or cause to be delivered to
Lender and will maintain or cause to be maintained
throughout the Term in full force and effect the
Guarantee, the Subordination Agreement(s) and all
other security agreements required pursuant to the
Documents.
-9-
<PAGE> 10
3.4 Upon full Performance of all of the Obligations by
Borrower, Lender shall reassign to Borrower all
Instruments then held by Lender or an agent for
Lender pursuant to a reassignment instrument in
form and substance identical to EXHIBIT G-1
prepared and delivered to it by Borrower and shall
execute appropriate releases of all UCC financing
statements filed in connection with the Receivables
Collateral.
IV. ADVANCES
4.1 Lender's obligation to make the initial Advance and
subsequent Advances shall be subject to and
conditioned upon the terms and conditions set forth
in the following subparagraphs and elsewhere in
this Agreement being satisfied and remaining
satisfied during the Term.
(a) Borrower shall have delivered to Lender the
following Documents, duly executed, delivered
and in form and substance satisfactory to
Lender:
(i) the Note;
(ii) if not covered by a then effective
Assignment, an Assignment of the specific
Instruments for which the Advance is
requested;
(iii) if not already delivered to Custodial
Agent, as agent for Lender, or as
otherwise directed by Lender, any
Instruments for which the Advance is
requested, properly endorsed;
(iv) the Guarantee;
(v) the Environmental Certificate;
(vi) UCC financing statements for filing
and/or recording, as appropriate, where
necessary to perfect the Security
Interest in the security required
pursuant to the Documents;
(vii) favorable opinions from independent
counsel for Borrower in form and
substance substantially identical to
EXHIBITS H-1 AND H-2;
(viii)a favorable opinion from independent
counsel for Guarantor in form and
substance substantially identical to
EXHIBIT I;
(ix) the Lockbox Agreement;
(x) the Servicing Agreement;
-10-
<PAGE> 11
(xi) the Custodial Agreement;
(xii) the Wendts' Subordination Agreement;
(xiii) an agreement in form and substance
identical to EXHIBIT L to clarify
certain Vacation Club Governing
Documents;
(xiv) an agreement executed by OPERF and
Lender in form and substance identical
to EXHIBIT N; and
(xv) this Agreement.
(b) Borrower shall have delivered to Lender at least
ten (10) Business Days prior to the date of the
Advance, or in the case of the items called for in
item (x) at least five (5) Business Days prior to
the date of the Advance:
(i) the Articles of Organization of Borrower
and Guarantor;
(ii) the Resolutions of Borrower and
Guarantor authorizing the execution and
delivery of the Documents;
(iii) intentionally deleted;
(iv) a copy of the registrations/consents to
sell, the final subdivision public
reports/public offering statements
and/or prospectuses and approvals
thereof required to be issued by or used
in the states where the Projects are
located and other jurisdictions where
Time-Share Interests have been offered
for sale or sold;
(v) a copy, certified as true and complete
by Borrower, of the Project Declaration
for each Project, credit applications
and disclosures, and other documents and
exhibits which have been or are being
used by Borrower in connection with the
sale of Time-Share Interests;
(vi) the Insurance Policies;
(vii) the Title Assurances;
(viii) the items described in EXHIBIT J; and
(ix) such other items as Lender requests
which are reasonably necessary to
evaluate the request for the Advance and
the satisfaction of the conditions
precedent to the Advance.
-11-
<PAGE> 12
(c) No material adverse change shall
have occurred in the Vacation Club
Program or in Borrower's or any
Guarantor's business or financial
condition since the date of the
latest financial and operating
statements (given to Lender by or on
behalf of Borrower or any Guarantor.
(d) There shall have been no material,
adverse change in the warranties and
representations made in the
Documents by Borrower, any Guarantor
and/or any other surety for the
Performance of any of the
Obligations.
(e) Neither an Event of Default nor
Incipient Default shall have
occurred and be continuing.
(f) The interest rate applicable to the
Advance (before giving effect to any
savings clause) will not exceed the
maximum rate permitted by the
Applicable Usury Law.
(g) Borrower shall have paid to Lender
the Commitment Fee and all other
fees required to be paid at the time
of the Advance.
(h) Borrower shall not be entitled to
any Advance unless on or before May
15, 1993, all Documents have been
executed by the persons required to
do so and delivered to Lender.
4.2 Advances shall be requested in writing by Borrower
and shall not be made more frequently than twice
monthly or in amounts less than $100,000.00. In
addition to all other fees required to be paid
pursuant to this Agreement, Borrower shall pay to
Lender at the time of the second Advance in a month
a fee equal to the greater of (a) 0.25% of such
Advance or (b) $500.00.
4.3 Advances may be disbursed to Borrower by wire
transfer; or at the written direction of Borrower,
to others, either severally or jointly with
Borrower, for the credit or benefit of Borrower, by
check, draft or wire transfer. Lender shall have no
obligation to wire transfer any Advance to Borrower
or any other person at Borrower's direction, unless
Borrower has given Lender written wire transfer
instructions satisfactory to Lender at the time of
the Advance. Borrower will pay Lender's reasonable
charge in connection with any wire transfer, which
is currently $25.00. Lender may, at its option,
withhold from any Advance any sum then due to it
under the terms of the Documents or any amount for
which Borrower is obligated to reimburse Lender
pursuant to the Documents.
-12-
<PAGE> 13
4.4 Although Lender shall have no obligation to make
an Advance unless and until all of the conditions
precedent to the Advance have been satisfied,
Lender may, at its sole discretion, make Advances
prior to that time without waiving or releasing any
of the Obligations.
V. NOTE, MAINTENANCE OF BORROWING BASE; PAYMENTS; SERVICING AND COLLECTION
5.1 The Loan shall be evidenced by the Note and shall
be repaid in immediately available funds according
to the terms of the Note.
5.2 Without limitation of Borrower's Obligations under
paragraph 3.2, if the aggregate principal amount of
the Loan outstanding at any time shall exceed the
then Borrowing Base of all Eligible Instruments for
any reason other than an Instrument or Instruments
not qualifying or ceasing to qualify as Eligible
Instruments (which is addressed by paragraph 3.2
above), Borrower, without notice or demand, will
immediately make to Lender a principal payment in
an amount equal to such excess plus accrued and
unpaid interest on such principal payment.
5.3 Borrower will not be entitled to prepay, in whole
or in part, the Loan until the Opening Prepayment
Date except as expressly provided in this
paragraph. Borrower shall be entitled (and is
obligated) to prepay the Loan to the extent the
prepayment ("Normal Prepayment") results from the
application of payments required from obligors on
the Receivables Collateral (unless solicited by
Borrower in contravention of its Obligations) or
from performance by Borrower of its Obligations
under paragraph 3.2 or 5.2 (unless due to a
misrepresentation or breach of warranty concerning
the Receivables Collateral qualifying as Eligible
Instruments); and Borrower shall have no obligation
to pay any Prepayment Premium in connection with a
Normal Prepayment. Borrower shall also be entitled
to make a single prepayment of the Loan (which
prepayment may be in whole or in part) prior to the
expiration of the Borrowing Term; and although
Borrower shall have no obligation to pay any
Prepayment Premium at the time of such prepayment,
Borrower shall pay to Lender upon the expiration of
the Borrowing Term a Prepayment Premium in an
amount equal to the product of 6% times the excess
of (a) the amount of the prepayment made pursuant
to this sentence over (b) the aggregate Advances
made after such prepayment and before the
expiration of the Borrowing Term. Furthermore,
commencing on the Opening Prepayment Date, if
neither an Event of Default nor an Incipient
Default has occurred and is continuing, then
Borrower shall have the option to prepay the Loan
in full, but not in part, upon 60 days prior
written notice to Lender and the simultaneous
payment of the Loan and
-13-
<PAGE> 14
the Prepayment Premium on any date an installment
is due on the Note. If (a) there shall occur a
casualty to or condemnation of all or any portion
of the Project or an Event of Default and (b) such
occurrence results in acceleration or prepayment of
the Loan, a Prepayment Premium will be required in
the amount which shall be determined as of and due
on the earlier of the date of acceleration or
prepayment.
5.4 (a) Lockbox Agent shall collect payments on the
Instruments constituting part of the
Receivables Collateral and remit collected
payments to Lender on the fifteenth (15th)
day (or, if not a Business Day, the next
Business Day) and last Business Day of each
and every month after the date of first
Advance, according to the terms of the
Lockbox Agreement. Payments shall not be
deemed received by Lender until Lender
actually receives such payments from
Lockbox Agent. Servicing Agent shall
furnish to Lender at Borrower's sole cost
and expense, no later than the tenth (10th)
day of each month commencing with the first
full calendar month following the date of
this Agreement, a report, substantially in
the format of EXHIBIT K, which: (i) shows
as of the end of the prior month with
respect to each Instrument which
constitutes part of the Receivables
Collateral (A) all payments received,
allocated between principal, interest, late
charges and taxes, (B) the opening and
closing balance, (C) present value, (D)
average consumer interest rate, and (E)
extensions, refinances, prepayments, and
other similar adjustments; and (ii)
indicates (A) the average consumer interest
rate of all Instruments which constitute
part of the Receivables Collateral and (B)
delinquencies on principal and interest
payments of thirty (30), sixty (60) and
ninety (90) days and on principal, interest
and assessment payments in excess of ninety
(90) days. On the basis of such reports,
Lender will compute the amount, if any,
which was due and payable by Borrower
during the preceding month and will notify
Borrower of any amount due. If such reports
are not timely received, Lender may
estimate the amount which was due and
payable. Borrower will pay within five (5)
Business Days after demand the amount
determined by Lender to be due and payable.
If payment is made on the basis of Lender's
estimate and thereafter reports required by
this paragraph are received by Lender, the
estimated payment amount shall be adjusted
by an additional payment or a refund to the
correct amount, as the reports may
indicate; such additional amount to be paid
by Borrower upon demand and such refund to
be made by Lender within
-14-
<PAGE> 15
five (5) Business Days after receipt of
written request therefor by Borrower. At
the end of each calendar quarter, Borrower
will deliver or cause the Servicing Agent
to deliver to Lender a current list of the
names, addresses and phone numbers of the
obligors on each of the Instruments
constituting part of the Receivables
Collateral. Borrower will also deliver or
cause Servicing Agent to deliver to Lender,
promptly after receipt of a written request
for them, such other reports with respect
to Instruments constituting part of the
Receivables Collateral as Lender may from
time to time require.
(b) Custodial Agent, as agent for
Lender, shall hold original custody of all
Instruments constituting part of the
Receivables Collateral and, if required by
Lender, any other items required to be
delivered to Lender with respect to the
Receivables Collateral.
(c) Lender, subject to any restriction
contained in the Lockbox Agreement or the
Servicing Agreement, as the case may be,
may at any time and from time to time in
its discretion substitute or require
Borrower to substitute a successor or
successors to any Agent acting under the
Lockbox Agreement, the Servicing Agreement
or the Custodial Agreement.
5.5 Subject to Lender's rights under Article VII, all
proceeds from the Receivables Collateral (except
payments which are identified by Purchasers as tax
and insurance impounds or maintenance and other
assessment payments and are required to be so
treated by Borrower) and the other security shall
be applied as follows: first to the payment of all
late charges, costs, fees and expenses required by
the Documents to be paid by Borrower; second to
accrued and unpaid interest due on the Note; third
to the unpaid principal balance of the Note; and
then to the other Obligations in such order and
manner as Lender may determine. Unless and until
all the Obligations have been Performed, Borrower
shall have no right to any portion of the proceeds
of the Receivables Collateral.
5.6 Whether or not the proceeds from the Receivables
Collateral shall be sufficient for that purpose,
Borrower will pay when due all payments required to
be made pursuant to any of the Documents,
Borrower's Obligation to make such payments being
absolute and unconditional.
VI. BORROWER'S REPRESENTATIONS, WARRANTIES AND COVENANTS
6.1 (a) Borrower is, and will remain at all times,
duly organized, validly existing and in
good standing
-15-
<PAGE> 16
under the laws of the State of Oregon and
in each jurisdiction in which it is selling
Time-Share Interests or where the location
or nature of its properties or its business
makes such qualification necessary.
Borrower has full authority to Perform the
Obligations and to carry on its business
and own its property.
(b) Borrower has full power and authority to grant the
Security Interest in the Receivables Collateral
and to execute and deliver the Documents and to
Perform the Obligations. All action necessary and
required by its Articles of Organization and all
applicable laws for the obtaining of the Loan and
for the execution and delivery of the Documents
executed and delivered in connection with the Loan
has been duly and effectively taken. The Documents
are and shall be legal, valid, binding and
enforceable against Borrower; and do not violate
the Applicable Usury Law or constitute a default or
result in the imposition of a lien under the terms
or provisions of any agreement to which Borrower is
a party. No consent of any governmental agency or
any other person not a party to this Agreement is
or will be required as a condition to the
execution, delivery or enforceability of the
Documents.
6.2 Except as referred to in EXHIBIT H-2, there is no
action, litigation or other proceeding pending or,
to Borrower's knowledge, threatened before any
court, arbitrator or governmental authority
involving Borrower, Vacation Club Association or
any of their respective properties, which might
materially adversely affect the Performance of the
Obligations, Vacation Club Program, the business or
financial condition of Borrower or the Vacation
Club Association, or the ability of Borrower to
Perform the Obligations. Borrower will promptly
notify Lender if any such action, litigation or
other proceeding is commenced or threatened.
6.3 (a) Borrower has sold or has offered for sale
Time-Share Interests only in California,
Washington and British Columbia and one
hundred percent (100%) of Time-Share
Interests have been sold in California and
Washington. Before it sells or offers for
sale Time-Share Interests in any other
jurisdictions, Borrower will promptly
notify Lender and provide Lender with
evidence that it has complied with all laws
of such jurisdiction governing its proposed
conduct.
(b) Borrower has complied, and will comply, in
all material respects, with all laws and
regulations of all governmental
jurisdictions in which Projects are located
or in which Time-Share Interests have
-16-
<PAGE> 17
been sold or offered for sale. Beginning
January 1, 1994, Borrower will not
advertise, offer for sale or sell
Time-Share Interests in any jurisdiction
unless Borrower is in strict compliance
with the registration and permit
requirements of such jurisdiction which
require that before Borrower may advertise,
offer for sale or sell Time-Share
Interests, it must first have registered
and received approval to sell such Time-
Share Interests.
(c) The time-share use and occupancy of
Vacation Club Units will not violate or
constitute a non-conforming use under any
private covenant or restriction or any
zoning, use or similar law, ordinance or
regulation affecting the use or occupancy
of the Vacation Club Units.
6.4 (a) Each Instrument assigned to Lender pursuant
to this Agreement shall be an Eligible
Instrument. Borrower has Performed all its
obligations to Purchasers, and there are no
executory obligations to Purchasers to be
Performed by Borrower, except those
described in the forms of Vacation Club
Owner Agreements attached as EXHIBITS M-1
AND M-2, all of which Borrower is ready,
willing and able to perform. Borrower
further warrants and guarantees the
enforceability of the Receivables
Collateral.
(b) Without the prior written consent of
Lender, Borrower will not cancel or
materially modify, or consent to or
acquiesce in any material modification to,
or solicit the prepayment of, any
Instrument which constitutes part of the
Receivables Collateral; or waive the timely
performance of the obligations of the
Purchaser under any such Instrument or its
security; or release the security for any
such Instrument. Borrower will not pay or
advance directly or indirectly for the
account of any Purchaser any sum owing by
the Purchaser under any Instrument which
constitutes part of the Receivables
Collateral.
(c) Borrower at all times will fulfill and will
cause its affiliates, agents and
independent contractors at all times to
fulfill all obligations to Purchasers.
(d) True and complete copies of the Vacation
Club Governing Documents (other than
Vacation Club Declarations for which a
prototype form has been provided), the
Project Declaration for each Project, the
form of Vacation Club Owner Agreement,
advertising materials (to the extent
advertising
-17-
<PAGE> 18
materials have been reasonably requested in
writing by Lender) and other documents and
exhibits thereto which have been and are
being used by Borrower in connection with
the sale or offering for sale of Time-Share
Interests have been delivered to Lender.
Borrower, without the prior written consent
of Lender, will not cancel or materially
modify any such documents except as
required by law and for advertising
materials and such amendments which are
necessary to annex additional Vacation Club
Units into the Vacation Club Program and
are otherwise in compliance with the terms
and conditions of this Agreement and the
Vacation Club Governing Documents. Borrower
will not annex additional Vacation Club
Units into the Vacation Club Program which
are not comparable in quality to those
which are currently a part of the Vacation
Club Program.
(e) Each owner is a member of the Vacation Club
Association, which has authority to levy
annual assessments to cover the costs of
maintaining and operating the Vacation Club
Program. Each Project has a Project Owner
Association of which Vacation Club
Association is a member and which has
authority to levy assessments to cover the
costs of maintaining and operating such
Project. Vacation Club Association and, to
the knowledge of Borrower, the Project
Owners Associations for the Projects are
solvent. Currently levied assessments upon
Owners are adequate to cover the costs of
maintaining and operating the Vacation Club
Program and to establish and maintain a
reasonable reserve for capital
improvements, and there are no events which
now are or could reasonably be foreseen by
Borrower which could give rise to a
material increase in such costs. To the
knowledge of Borrower, currently levied
assessments upon members of each Project
Owners Association and any required subsidy
payments from the developers of such
Projects are adequate to cover the costs of
maintaining and operating such Projects and
to maintain a reasonable reserve for
capital improvements; and there are no
events which now are or could reasonably be
foreseen by Borrower which could give rise
to a material increase in such costs.
Borrower will (i) use its best efforts to
cause the Vacation Club Association and the
Project Owners Associations for the
Projects to (A) discharge their respective
obligations under the Vacation Club
Governing Documents and the Project
Governing Documents and (B) maintain the
reserves described above; and (ii) pay to
the Vacation Club Association not less
often than every twelve (12) months an
amount not less than the difference
-18-
<PAGE> 19
between (A) the cumulative total
amount of the maintenance and
operating expenses incurred by the
Vacation Club Association, together
with a reasonable reserve for
capital improvements and the amount
of any installment of real property
taxes currently due and payable with
respect to the Vacation Club Units,
through the end of the calendar
month preceding the month in which
such payment is made and (B) the
cumulative total amount of
assessments payable to Vacation Club
Association by Owners other than
Borrower through the end of the
calendar month preceding the month
in which such payment is made.
(f) Vacation Club Association owns good
and marketable title to a fee
simple, possessory interest in and
to all Vacation Club Units, the
furnishings in the Vacation Club
Units, and other amenities which
have been promised or represented as
being available to Purchasers, free
and clear of liens and security
interests except for the Permitted
Encumbrances and Vacation Club
Declarations. To Borrower's
knowledge, each Project has adequate
legal access and will be served by
adequate utilities.
(g) Without limiting the generality of
any other provision contained in
this Agreement:
(i) Borrower will at all times
cause Vacation Club
Association to have good and
marketable title to a
sufficient number of Vacation
Club Units, free and clear of
all liens and encumbrances
other than the Permitted
Encumbrances and the Vacation
Club Declarations, so that,
over the remaining term of the
Vacation Club Owner
Agreements, the total number
of Vacation Club Credits held
by Owners does not exceed 100%
of the Vacation Club Credit
values reasonably assigned to
such Vacation Club Units or
such lesser percentage as may
be required by the Vacation
Club Governing Documents;
(ii) Borrower will maintain or
cause the Vacation Club
Association to maintain in
good condition and repair all
Vacation Club Units;
(iii) Borrower will maintain in good
condition and repair all
Projects in which the Vacation
Club Units are located and all
amenities related to the
Vacation Club Units, if such
improvements are owned by
Borrower or an Affiliate of
Borrower; and, if such
improvements are not owned by
Borrower or an Affiliate of
Borrower, will use reasonable
efforts to cause the owner
-19-
<PAGE> 20
of the improvements or the
appropriate Project Owners
Association to do so;
(iv) Borrower has recorded a
Vacation Club Declaration in
form and substance
substantially identical to
EXHIBIT M-3 on the real
property records of each
jurisdiction in which Vacation
Club Units are located;
(v) The Vacation Club Declaration
prototype form, the Vacation
Club Program Agreement, the
Vacation Club Reimbursement
Agreement, the Vacation Club
Management Agreement, the
Vacation Club Rules, and the
Articles of Organization of
the Vacation Club Association,
in form and substance
identical to EXHIBITS M-3
THROUGH M-8, are in full force
and effect and, except for the
Project Governing Documents
for each Project, constitute
the only governance documents
for the Vacation Club Program;
there are no amendments to
them, except as described in
this Agreement, and no party
is in default of its
obligations under any such
agreement;
(vi) Borrower will perform all of
its obligations under the
Vacation Club Governing
Documents; and
(vii) Borrower will not permit or
suffer to exist any liens or
encumbrances on the Vacation
Club Units, except for the
Permitted Encumbrances and the
Vacation Club Declarations.
6.5 Borrower will undertake the diligent and timely
collection of amounts delinquent under each
Instrument which constitutes part of the
Receivables Collateral and will bear the entire
expense of such collection. Lender shall have no
obligation to undertake any action to collect under
any Instrument.
6.6 Lender may notify Purchasers of the existence of
Lender's interest as assignee in the Receivables
Collateral and request from Purchasers any
information relating to the Receivables Collateral.
Borrower will deliver such notice under its
letterhead if requested.
6.7 Borrower, without the prior written consent of
Lender, will not: (a) sell, convey, pledge,
hypothecate, encumber or otherwise transfer any
security for the Performance of the Obligations;
(b) permit or suffer to exist any liens, security
interests or other encumbrances on any security for
the Performance of the Obligations, except for the
-20-
<PAGE> 21
Permitted Encumbrances, the Vacation Club
Declarations, and liens and security interests
expressly granted to Lender; (c) sell, lease,
transfer or dispose of all or substantially all of
its assets to another entity; or (d) permit or
suffer to exist any transfer of the control of
Borrower or Guarantor.
6.8 Borrower will, or will cause the Vacation Club
Association to, maintain and pay the cost of the
Insurance Policies and will deliver copies of the
Insurance Policies to Lender.
6.9 (a) The Documents and all certificates, financial
statements and written materials furnished to
Lender by or on behalf of Borrower in
connection with the Loan do not contain any
untrue statement of a material fact or omit to
state a fact which materially adversely affects
or in the future may materially adversely
affect the Receivables Collateral or any other
security for the Performance of the Obligations
or the business or financial condition of
Borrower or the Vacation Club Program.
(b) Lender's examination, inspection, or receipt of
information pertaining to the Receivables
Collateral or the Project and its proposed
operation shall not in any way be deemed to
reduce the full scope and protection of the
warranties, representations and Obligations
contained in this Agreement.
6-10 (a) On or before the tenth (10th) day of each
month, Borrower will cause to be furnished to
Lender (i) the reports required pursuant to
paragraph 5.4(a) and (ii) if requested by
Lender, a sales report for the prior month
showing the number of sales of Time-Share
Interests, their aggregate dollar amount and
related down payments.
(b) Borrower will furnish or cause to be furnished
to Lender within ninety (90) days after each
fiscal year of the subject, a copy of the
current annual financial statements of
Borrower, Guarantor and, subject to the best
efforts of Borrower, the Vacation Club
Association and each Project Owners
Association; and shall furnish or cause to be
furnished to Lender within 45 days after each
interim quarterly fiscal period of Borrower and
Guarantor a copy of the current financial
statements of Borrower and Guarantor for the
period commencing with the first day of the
fiscal year and concluding with such quarter
end. Such financial statements shall contain a
balance sheet
-21-
<PAGE> 22
as of the end of the relevant fiscal period and
statements of income and of cash flow for such
fiscal period (together, in each case, with the
comparable figures for the corresponding period
of the previous fiscal year), all in reasonable
detail. All financial statements shall be
prepared in accordance with generally accepted
accounting principles, consistently applied.
All financial statements of Borrower and
Guarantor required pursuant to this paragraph
shall be certified by their respective chief
financial officer. Borrower will use its best
efforts to cause annual financial statements of
the Vacation Club Association and each Project
Owners' Association to be certified by the
chief financial officer and managing agent for
such entity. Annual statements of Borrower and
Guarantor shall be audited and certified by a
recognized firm of certified public accountants
reasonably satisfactory to Lender. Together
with such financial statements, Borrower will
deliver to Lender a certificate signed by the
chief financial officer or managing general
partner, as the case may be, of Borrower
stating that there exists no Event of Default
or Incipient Default or, if any such Event of
Default or Incipient Default exists, specifying
the nature and period of its existence and what
action Borrower proposes to take with respect
to it.
(c) Borrower will deliver to Lender from time to
time, as available, and promptly upon any
material amendment, current price lists, sales
literature (to the extent requested in writing
by Lender) registrations/consents to sell,
final subdivisions public reports/public
offering statements/prospectuses, purchase
documents, and any other items requested by
Lender which relate to the Time-Share
Interests, to the use of the Vacation Club
Units, or to the Vacation Club Program.
(d) Borrower will at its reasonable expense permit
Lender and its representatives at all
reasonable times to inspect the Vacation Club
Units and to inspect, audit and copy Borrower's
records, provided that such inspections of
Vacation Club Units shall be reasonably
conducted by Lender, done on a sample basis to
the extent deemed prudent by Lender in its sole
and absolute judgment [which may include an
inspection of all Projects (i) in which the
Vacation Club Association, Borrower or an
Affiliate of Borrower owns fifty percent (50%)
of all units in the Project or (ii) in which
20% or more of all Vacation Club Units are
located] and made not more often than annually
unless, upon the
-22-
<PAGE> 23
subsequent inspection, an Event of Default
exists or a material, adverse event (such as
substantial destruction to a material number of
Units) has occurred; and shall make available
such further information as Lender may from
time to time reasonably request.
(e) Borrower will submit to Lender annually,
within twenty (20) days after each is
available, proposed annual maintenance and
operating budgets of the Vacation Club
Association and each Project Owners
Association, certified to be adequate by the
managing agent for such association and a
statement of the annual assessment to be levied
upon the Owners or the Vacation Club
Association, as the case may be; and will use
its best efforts to cause to be made available
to Lender, at Borrower's expense, for
inspection, auditing and copying, upon Lender's
request, the books of account, logs and records
of each such association.
(f) Borrower will deliver to Lender within twenty
(20) days after it is available, the quarterly
audited report prepared by the Washington
Department of Real Estate with respect to
Vacation Club Association's vacation credit
inventory. If the Washington Department of Real
Estate ceases to prepare such a report,
Borrower shall deliver to Lender a report of an
independent auditing firm addressed to Lender
verifying the cumulative number of Vacation
Club Credits represented by the Vacation Club
Units, the cumulative number of Vacation Club
Credits represented by Vacation Club Owner
Agreements which have not expired or been
terminated, and all financial transactions, if
any, of Vacation Club Association pertaining to
the sale or purchase of Vacation Club Units.
When Vacation Club Units are added to the
Vacation Club Program, Borrower will, within a
reasonable period of time thereafter, submit to
Lender the Title Assurances for such Vacation
Club Unit. Within 90 days after receipt of
written demand ("Title Information Demand") but
not more often than annually, Borrower will
provide to Lender current title information
("Title Information") consisting of statements
prepared by title underwriters satisfactory to
Lender reflecting the ownership and lien status
of or, at Borrower's option, Title Assurances
with regard to a number of Vacation Club Units
determined at the time of the Title Information
Demand as follows: the greater of (i) the then
total number of Projects or (ii) ten percent
(10%) of the then total number of Vacation Club
Units. Vacation Club Units to be covered by the
Title
-23-
<PAGE> 24
Information shall be specified in the Title
Information Demand. If an Event of Default
exists and Lender has accelerated the Note,
Lender may require current Title Information
with respect to all Vacation Club Units. Title
Information shall be considered current if
dated not earlier than thirty (30) days from
the date delivered to Lender.
(g) Without limiting the generality of any other
provision of this Agreement, Lender or its
designee may, at Borrower's expense, audit the
system of Vacation Club Association and
Borrower utilized in tracking the cumulative
number of Vacation Club Credit values
represented by the Vacation Club Units and the
cumulative number of Vacation Club Credits
represented by Vacation Club Owner Agreements
which have not expired or been terminated.
(h) Borrower shall notify Lender when the
outstanding principal balance (including any
capitalized interest) of the OPERF Debt has
been reduced to $10,000,000.00.
(i) Borrower will promptly notify Lender if
Vacation Club Association elects not to renew
the Vacation Club Management Agreement with
Borrower, to terminate such Agreement with
Borrower or to remove Borrower as manager under
such Agreement.
6.11 Borrower will cause any and all indebtedness owing
by it to its shareholders, directors, officers or
partners, as the case may be, Guarantor(s), any
shareholder of Guarantor or the relatives and
Affiliates of Borrower or the foregoing
("Subordinating Parties") to be subordinated in all
aspects to the Obligations. Reasonable salaries and
reasonable fees for services which were actually
rendered and were reasonably required by Borrower
shall not be considered indebtedness for purposes
of this paragraph. However, if no Event of Default
exists and such payments are otherwise permitted
pursuant to paragraph 9.4, Borrower may make to
Subordinating Parties and Subordinating Parties may
retain payments then due and owing (other than by
way of acceleration) on indebtedness for borrowed
money. Furthermore, the subordination required of
the Wendts by virtue of the obligations of Borrower
under the Wendts Purchase Documents shall be
subject to the terms and conditions of the Wendts
Subordination Agreement.
6.12 Borrower and Vacation Club Association are not in
default of any payment on account of indebtedness
for borrowed money or of any repurchase obligations
in connection with a receivables purchase
financing, or in violation of or
-24-
<PAGE> 25
in default under any material term in any
agreement, order, decree or judgment of any court,
arbitration or governmental authority to which
either of them is a party or by which either of
them is bound.
6.13 Borrower and Vacation Club Association have filed
all tax returns and paid all taxes, assessments,
levies and penalties, if any, required to be filed
by them or paid by them to any governmental or
quasi-governmental authority or subdivision,
including real estate taxes and assessments
relating to Vacation Club Association. Borrower
will provide to Lender not more than thirty (30)
days after such taxes and assessments become due
evidence that all taxes and assessments on the
Vacation Club Units have been paid in full.
6.14 Borrower will pay to Lender the Commitment Fee and,
in addition to that fee, $20,000.00 ("Documentation
Fee") for the preparation of the Documents executed
at or prior to the closing of the first Advance.
Borrower has paid to Lender $25,000.00 of the
Commitment Fee and the entire Documentation Fee.
Borrower will pay to Lender the $25,000.00 balance
of the Commitment Fee at the time the initial
Advance is made, but in no event later than May 30,
1993. Borrower acknowledges that the Commitment Fee
and the Documentation Fee have been earned and are
non-refundable. Borrower will pay on demand any
and all costs and expenses incurred by Lender in
connection with the initiation, documentation and
closing of the Loan, the making of Advances, the
protection of the security for the Performance of
the obligations, or the enforcement of the
Obligations against Borrower or Guarantor(s),
including, without limitation, all attorneys' and
other professionals' fees, consumer credit reports,
and revenue, documentary stamp and intangible
taxes; provided, however, that Lender shall pay and
be solely responsible for all expenses of its
employees prior to the first Advance, except for
travel expenses not exceeding $5,000.00.
Notwithstanding anything in this paragraph to the
contrary, Borrower will have no obligation to pay
or reimburse Lender for Lender's attorneys' fees
(but shall not be relieved of the obligation to pay
or reimburse Lender for the reasonable
out-of-pocket expenses of such attorneys) which are
incurred in connection with the original
preparation, negotiation and execution of the
Documents delivered prior to or in connection with
the first Advance ("Original Documents") or the
closing of the first Advance, except for such
attorneys' fees which are in excess of the
Documentation Fee and are caused by the negligence
or lack of diligence or cooperation by Borrower in
the negotiation of the Original Documents and the
closing of the first Advance, changes requested by
Borrower to that commitment letter from Lender to
-25-
<PAGE> 26
Borrower dated December 8, 1992, or circumstances
which could not reasonably have been foreseen by
Lender.
6.15 Borrower will INDEMNIFY, PROTECT, HOLD HARMLESS,
AND DEFEND Lender, its successors, assigns and
shareholders (including corporate shareholders),
and the directors, officers, employees, agents and
servants of the foregoing, for, from and against
any and all losses, costs, expenses (including,
without limitation, court costs and attorneys'
fees), demands, claims, suits, proceedings (whether
civil or criminal), orders, judgments, penalties,
fines and other sanctions arising from or brought
in connection with (a) the Vacation Club Program,
the Vacation Club Units, the Projects, the security
for the Performance of the Obligations, Lender's
status by virtue of the creation of Security
Interests, the terms of the Documents or the
transactions related thereto, or any act or
omission of Borrower or any Agent, or their
respective employees, contractors or agents,
whether actual or alleged, and (b) any and all
brokers' commissions or finders' fees or other
costs of similar type by any party in connection
with the Loan. On written request by a person or
other entity covered by the above agreement of
indemnity, Borrower will undertake, at its own cost
and expense, on behalf of such indemnitee, using
counsel satisfactory to the indemnitee, the defense
of any legal action or proceeding to which such
person or entity shall be a party. At Lender's
option, Lender may at Borrower's expense prosecute
or defend any action involving the priority,
validity or enforceability of the Security
Interests in the Receivables Collateral and any
other security required pursuant to the Documents.
6.16 Borrower will execute or cause to be executed all
documents and do or cause to be done all acts
necessary for Lender to perfect and to continue the
perfection of the Security Interest of Lender in
the Receivables Collateral or the other security
required pursuant to the Documents or otherwise to
effect the intent and purposes of the Documents.
6.17 The representations, warranties and covenants
contained in this Article VI are in addition to,
and not in derogation of, the representations,
warranties and covenants contained elsewhere in the
Documents and shall be deemed to be made and
reaffirmed prior to the making of each Advance.
VII. DEFAULT
7.1 The occurrence of any of the following events or
conditions shall constitute an Event of Default by
Borrower under the Documents:
-26-
<PAGE> 27
(a) failure of Lender to receive from Borrower
within five (5) Business Days of the date
when due and payable (i) any amount payable
under the Note or (ii) any other payment due
under the Documents, except for the Note
payment due at the Maturity Date for which no
grace period is allowed;
(b) any representation or warranty of Borrower
contained in the Documents or in any
certificate furnished under the Documents
proves to be, in any material respect, false
or misleading as of the date deemed made and
such false or misleading representation is
not corrected to the reasonable satisfaction
of Lender within 30 days after notice thereof
to Borrower;
(c) a material default in the Performance of the
Obligations set forth in paragraph 3.2;
(d) a material default in the Performance of the
Obligations or a violation of any term,
covenant or provision of the Documents (other
than a default or violation referred to
elsewhere in this paragraph 7.1) which
continues unremedied (i) for a period of ten
(10) Business Days after notice of such
default or violation to Borrower in the case
of a default under or violation of paragraph
6.4(b) or 6.11 or any other default or
violation which can be cured by the payment
of money alone or (ii) for a period of thirty
(30) Business Days after notice to Borrower
in the case of any other default or
violation;
(e) an "Event of Default", as defined elsewhere
in any of the Documents, or in any agreement
between Borrower or any Affiliate of it, on
the one hand, and Lender or any Affiliate of
it on the other hand;
(f) any default by Borrower under any other
agreement evidencing, guaranteeing, or
securing borrowed money or a receivables
purchase financing that causes or results in
the acceleration of such indebtedness or
repurchase obligations of Borrower, which
accelerated payment or repurchase obligations
are in excess of $100,000.00 in the
aggregate;
(g) any final, non-appealable judgment or decree
for money damages or for a fine or penalty
against Borrower which is not paid and
discharged or stayed within thirty (30) days
thereafter and when aggregated with all other
judgment(s) or decree(s) that have remained
unpaid and undischarged or stayed for such
period is in excess of $100,000.00
-27-
<PAGE> 28
and such situation shall continue for ten
(10) Business Days after notice thereof to
Borrower;
(h) any party holding a lien or security interest
in the Receivables Collateral or any other
security for the Performance of the
Obligations or a lien (other than a lien
created by Purchaser solely with respect to
its Time-Share Interest) on any part of a
Vacation Club Unit commences foreclosure or
similar sale thereof;
(i) Borrower shall (i) generally not be paying
its debts as they become due, (ii) file or
consent by answer or otherwise to the filing
against it of a petition for relief or
reorganization, arrangement or liquidation or
any other petition in bankruptcy or
insolvency under the laws of any
jurisdiction, (iii) make an assignment for
the benefit of its creditors, (iv) consent to
the appointment of a custodian, receiver,
trustee or other officer with similar powers
for itself or any substantial part of its
property, (v) be adjudicated insolvent, (vi)
dissolve or commence to wind-up its affairs
or (vii) take any action for purposes of the
foregoing;
(j) a material adverse change in the Vacation
Club Program or in the business or financial
condition of Borrower or in the Receivables
Collateral or any other security for the
Performance of the Obligations, which change
is not enumerated in this paragraph 7.1 as
the result of which Lender in good faith
deems the prospect of Performance of the
Obligations impaired or its security for the
Performance of the Obligations imperiled;
(k) any of the events enumerated in paragraph
7.1(b), (f), (g), (i) or (j) occurs with
respect to any Guarantor or surety for the
Performance of the Obligations;
(l) failure of Lender to receive from Borrower,
within twenty (20) days of the date Borrower
knows or should have known of such change,
notice of any material change in any
representations or warranties in the
Documents or otherwise made in connection
with the Loan; or
(m) Borrower fails or defaults in its obligations
under paragraph 6.8.
7.2 At any time after an Event of Default has occurred
and while it is continuing, Lender may but without
obligation, in addition to the rights and powers
granted
-28-
<PAGE> 29
elsewhere in the Documents and not in limitation
thereof, do any one or more of the following:
(a) cease to make further Advances;
(b) declare the Note, together with prepayment
premiums and all other sums owing by
Borrower to Lender in connection with the
Documents, immediately due and payable
without notice, presentment, demand or
protest, which are hereby waived by
Borrower;
(c) with respect to the Receivables Collateral,
(i) institute collection, foreclosure and
other enforcement actions against Purchasers
and other persons obligated on the
Receivables Collateral, (ii) enter into
modification agreements and make extension
agreements with respect to payments and
other performances, (iii) release persons
liable for performance, (iv) settle and
compromise disputes with respect to payments
and performances claimed due, all without
notice to Borrower, without being called to
account for such actions by Borrower and
without relieving Borrower from Performance
of the Obligations, and (v) receive,
collect, open and read all mail of Borrower
for the purpose of obtaining all items
pertaining to the Receivables Collateral;
and
(d) proceed to protect and enforce its rights
and remedies under the Documents, to
foreclose or otherwise realize upon its
security for the Performance of the
Obligations, and/or to exercise any other
rights and remedies available to it at law,
in equity or by statute.
7.3 Notwithstanding anything in the Documents to the
contrary, while an Event of Default exists, any
cash received and retained by Lender in connection
with the Receivables Collateral may be applied to
payment of the Obligations in the manner provided
in paragraph 7.5.
7.4 (a) Lender shall have all of the rights and
remedies of a secured party under the
Uniform Commercial Code of the State of
Arizona and all other rights and remedies
accorded to a Secured Party at equity or
law. Any notice of sale or other disposition
of the Receivables Collateral given not less
than ten (10) Business Days prior to such
proposed action in connection with the
exercise of Lender's remedies shall
constitute reasonable and fair notice of
such action. Lender may postpone or adjourn
any such sale from time to time by
announcement at the time and place of sale
stated on the notice of sale or by
announcement of any adjourned sale, without
-29-
<PAGE> 30
being required to give a further notice of
sale. Any such sale may be for cash or, unless
prohibited by applicable law, upon such credit
or installment as Lender may determine.
Borrower shall be credited with the net
proceeds of such sale only when such proceeds
are actually received by Lender in good
current funds. Despite the consummation of any
such sale, Borrower shall remain liable for
any deficiency on the Obligations which
remains outstanding following such sale. All
net proceeds recovered pursuant to a sale
shall be applied in accordance with the
provisions of paragraph 7,5.
(b) Lender may, in the name of Borrower
or in its own name, make and execute
all conveyances, assignments and
transfers of the Receivables
Collateral sold in connection with
the exercise of Lender's remedies;
and Lender is hereby appointed
Borrower's attorney-in-fact for this
purpose.
(c) Upon request of Lender when an Event
of Default exists, Borrower shall
assemble the Receivables Collateral
not already in Lender's possession
and make it available to Lender at a
time and place designated by Lender.
7.5 The proceeds realized from any sale of all or any
part of the Receivables Collateral made in
connection with the exercise of Lender's remedies
shall be applied in the following order of
priorities; first, to the payment of all costs and
expenses of such sale, including without
limitation, reasonable compensation to Lender and
its agents, attorneys fees, and all other expenses,
liabilities and advances incurred or made by
Lender, its agents and attorneys, in connection
with such sale, and any other unreimbursed expenses
for which Lender may be reimbursed pursuant to the
Documents; second, to the payment of the other
Obligations, in such order and manner as Lender
shall in its discretion determine, with no amounts
applied to payment of principal until all interest
has been paid; and third, to the payment to
Borrower, its successors or assigns, or to
whomsoever may be lawfully entitled to receive the
same, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such
proceeds.
7.6 Lender may, at its option, and without any
obligation to do so, pay, perform and discharge any
and all liabilities agreed to be paid or performed
in the Documents by Borrower, any Guarantor or any
surety for the Performance of the Obligations if
the person obligated fails to do so, For such
purposes Lender may use the proceeds of the
Receivables Collateral. All amounts expended by
Lender in so doing or in exercising its remedies
under the
-30-
<PAGE> 31
Documents following an Event of Default shall
become part of the Obligations, shall be
immediately due and payable by Borrower to Lender
upon demand, and shall bear interest at the Default
Rate from the dates of such expenditures until
paid.
7.7 No remedy in any Document conferred on or reserved
to Lender is intended to be exclusive of any other
remedy or remedies, but each and every such remedy
shall be cumulative and shall be in addition to
every other remedy given under any Document or now
or hereafter existing at law or in equity. No delay
or omission to exercise any right or power shall be
construed to be a waiver of or acquiescence to any
default or a waiver of any right or power; and
every such right and power may be exercised from
time to time and as often as may be deemed
expedient.
7.8 Borrower, for itself and for all who may claim
through or under it, hereby expressly waives and
releases all right to have the Receivables
Collateral or any other security for the
Performance of the Obligations, or any part of such
security, marshalled on any foreclosure sale or
other enforcement of Lender's rights and remedies.
7.9 For the purpose of exercising its rights and
remedies under Paragraph 7,2(c) and 7.6, Lender may
do so in Borrower's name or its name and is hereby
appointed as Borrower's attorney-in-fact to take
any and all actions in Borrower's name and/or on
Borrower's behalf as Lender may deem necessary or
appropriate in its sole and absolute discretion in
the accomplishment of such purposes.
VIII. CONSTRUCTION AND GENERAL TERMS
8.1 All moneys payable under the Documents shall be
paid to Lender at its address set forth on the
signature page of this Agreement in lawful monies
of the United States of America, unless otherwise
designated in the Documents or by Lender by notice.
8.2 The Documents exclusively and completely state the
rights and obligations of Lender and Borrower with
respect to the Loan. No modification, variation,
termination, discharge, abandonment or waiver of
any of the terms or conditions of the Documents
shall be valid unless in writing and signed by duly
authorized representatives of the party sought to
be bound by such action. The Documents supersede
any and all prior representations, warranties
and/or inducements, written or oral, heretofore
made by Lender concerning this transaction,
including any commitment for financing.
-31-
<PAGE> 32
8.3 The powers and agency granted to Lender by Borrower
in the Documents are coupled with an interest and
are irrevocable and are granted as cumulative to
Lender's other remedies for collection and
enforcement of the Obligations.
8.4 Any Document may be executed simultaneously in any
number of identical copies each of which shall
constitute an original for all purposes.
8.5 Except as otherwise expressly provided in the
Document, any notice required or permitted to be
given under any Document by Lender or Borrower to
the other shall be in writing and shall be (a)
personally delivered, (b) transmitted postage
prepaid by certified or registered mail, (c) sent
by overnight express carrier, or (d) sent by
telecopy, to Lender or Borrower at its address
and/or telecopy number as set forth on the
signature page of this Agreement, or at such other
address and/or telecopy number as either party may
designate for such purpose in a notice given to the
other patty. Such notice shall be deemed received
upon the earliest of the following to occur: (a)
upon personal delivery; (b) on the third Business
Day following the day sent, if sent by registered
or certified mail; (c) on the next Business Day
following the day sent, if sent by overnight
express courier; and (d) on the day sent or if such
day is not a Business Day on the next Business Day
after the day sent, if sent by telecopy.
8.6 All the covenants of Borrower and all the rights
and remedies of the Lender contained in the
Documents shall bind Borrower, and, subject to the
restrictions on merger, consolidation and
assignment contained in the Documents, its
successors and assigns, and shall inure to the
benefit of Lender, its successors and assigns,
whether so expressed or not. Borrower may not
assign its rights in the Documents in whole or in
part. Except as may be expressly provided in a
Document, no person or other entity shall be deemed
a third party beneficiary of any provision of the
Documents.
8.7 If any one or more of the provisions contained in
any Document shall be held invalid, illegal or
unenforceable in any respect, the validity,
legality and enforceability of the remaining
provisions contained in the Document shall not in
any way be affected or impaired thereby.
8.8 Time is of the essence in the Performance of the
Obligations.
8.9 All headings are inserted for convenience only and
shall not affect any construction or interpretation
of the Documents. Unless otherwise indicated, all
references in
-32-
<PAGE> 33
a Document to clauses and other subdivisions refer
to the corresponding paragraphs, clauses and other
subdivisions of the Document; the words "herein",
"hereof", "hereto", hereunder" and words of similar
import refer to the Document as a whole and not to
any particular paragraph, clause or other
subdivision; the use of any gender shall be deemed
to include other genders, unless inappropriate; and
reference to a numbered or lettered subdivision of
an Article, or paragraph shall include relevant
matter within the Article or paragraph which is
applicable to but not within such numbered or
lettered subdivision. All Schedules and Exhibits
referred to in this Agreement are incorporated in
this Agreement by reference.
8.10 THE DOCUMENTS SHALL BE CONSTRUED AND GOVERNED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
ARIZONA, AND TO THE EXTENT THEY PREEMPT THE LAWS OF
SUCH STATE, THE LAWS OF THE UNITED STATES; PROVIDED
THAT IF ANY OBLIGATION, AGREEMENT OR WAIVER ON THE
PART OF BORROWER OR ANY OTHER PERSON OBLIGATED
PRIMARILY OR SECONDARILY ON THE DOCUMENTS OR RIGHT
OF REMEDY OF LENDER WOULD BE INVALID OR
UNENFORCEABLE UNDER SUCH LAWS BUT WOULD BE VALID OR
ENFORCEABLE UNDER THE LAWS OF THE STATE OF OREGON,
THEN THE INTERNAL LAWS OF THE STATE OF OREGON SHALL
APPLY WITH RESPECT TO SUCH MATTER. BORROWER HEREBY
AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN
ANOTHER DOCUMENT, ALL ACTIONS OR PROCEEDINGS
INITIATED BY BORROWER AND ARISING DIRECTLY OUT OF
THE DOCUMENTS SHALL BE LITIGATED IN THE SUPERIOR
COURT OF ARIZONA, MARICOPA COUNTY DIVISION, OR THE
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF
ARIZONA, OR, IF LENDER INITIATES SUCH ACTION, ANY
COURT IN WHICH LENDER SHALL INITIATE SUCH ACTION TO
THE EXTENT SUCH COURT HAS JURISDICTION. BORROWER
HEREBY KNOWINGLY AND VOLUNTARILY WAIVES TRIAL BY
JURY IN ANY SUCH PROCEEDING, THIS PROVISION IS A
MATERIAL INDUCEMENT FOR LENDER'S MAKING THE LOAN TO
BORROWER.
[Borrower (initial ___________)]
8.11 It is the intent of the parties hereto to comply
with the Applicable Usury Law. Accordingly,
notwithstanding any provision to the contrary in
the Documents, in no event shall this Agreement or
the Documents require the payment or permit the
collection of interest in excess of the maximum
contract rate permitted by the Applicable Usury
Law.
8.12 LENDER DOES NOT HEREBY ASSUME AND SHALL HAVE NO
RESPONSIBILITY, OBLIGATION OR LIABILITY TO
PURCHASERS, LENDER'S RELATIONSHIP BEING THAT ONLY
OF A CREDITOR WHO HAS TAKEN, AS SECURITY FOR
INDEBTEDNESS OWED TO IT, A COLLATERAL ASSIGNMENT
FROM BORROWER OF THE INSTRUMENTS. EXCEPT AS
REQUIRED BY LAW, BORROWER WILL NOT, AT ANY TIME,
USE THE NAME OF OR MAKE REFERENCE TO LENDER WITH
-33-
<PAGE> 34
RESPECT TO THE PROJECT, THE SALE OF TIME-SHARE
INTERESTS OR. OTHERWISE, WITHOUT THE EXPRESS
WRITTEN CONSENT OF LENDER.
IX. SPECIAL PROVISIONS
9.1 As additional conditions precedent to the making
of the first Advance, the following must occur
prior to the making of the first Advance:
(a) Lender shall have received in form and
substance satisfactory to it, in its sole and
absolute discretion: (i) a UCC search with
respect to Borrower; (ii) lien, litigation and
judgment searches on Borrower, Guarantor and
their respective principals; (iii) Dun and
Bradstreet and credit bureau reports on
Borrower, Guarantor and their respective
principals; and (iv) available financial
statements for the most recent fiscal year end
for all Project Owner Associations for the
Projects, certified to be true and correct by
the respective managers of such associations;
(b) Lender shall have performed site inspections
of a sample of existing Projects, the results
of which site inspections must be satisfactory
to Lender, in its sole and absolute
discretion;
(c) Lender must have received and be satisfied
with, in its sole and absolute discretion,
financial statements and references for
Intercity Escrow Services and Sage Systems,
Inc.;
(d) Lender shall have received (i) evidence
satisfactory to it, in its sole and absolute
discretion, that Borrower is in full
compliance with its obligations under the loan
documents executed in connection with the
OPERF Debt, and no event has occurred which
would permit the acceleration of the OPERF
Debt; and (b) a favorable credit reference
from OPERF;
(e) Lender must be satisfied, in its sole and
absolute discretion, with the environmental
due diligence reviews of the Projects within
the Vacation Club Program; and
(f) Lender must be satisfied, in its sole and
absolute discretion, with the following:
(i) the manner in which legal title to each
Vacation Club Unit is conveyed to Vacation
Club Association and annexed into the
Vacation Club Program;
-34-
<PAGE> 35
(ii) how the ownership of the Vacation Club
Units within the Vacation Club Program
by Vacation Club Association is
accounted for on the financial
statements of Vacation Club Association
and Borrower;
(iii) the manner in which Vacation Club
Association is, and may be, owned,
operated, and controlled;
(iv) the manner in which Vacation Club Units
are transferred into or out of the
Vacation Club Program;
(v) the manner in which uninterrupted use,
and lien-free operation, subject only to
the Permitted Encumbrances, of all
Vacation Club Units is guaranteed to
Owners; and
(vi) all units within the Vacation Club
Program being fully complete units or
units for which completion is guaranteed
within a reasonable time period
("Completed Units");
9.2 Borrower covenants and agrees that it shall cause
expenses (i.e. expenses incurred from promotion,
lead generation and sale of Time-Share Interests
but excluding marketing overhead) incurred by it
with respect to the sales of Time-Share Interests
during each twelve month period terminating at the
end of each fiscal quarter of Borrower not to
exceed fifty percent (50%) of the net sales of
Time-Share Interests during such period.
9.3 Borrower hereby covenants and agrees that it shall
maintain a minimum tangible net worth in an amount
("Minimum Tangible Net Worth Requirement") not less
than: $3,500,000 until December 31, 1993 and
thereafter an amount equal in any calendar year to
the Minimum Tangible Net Worth Requirement for the
preceding calendar year plus 50% of the Borrower's
net income (but not, however, to be reduced by any
losses) for the preceding calendar year. As used in
this Agreement, the term "tangible net worth" means
the worth of tangible assets, such as plant
equipment, and current assets (but exclusive, for
example, of good will) over liabilities, all in
accordance with GAAP; and the term "net income"
means the net income of Borrower as determined in
accordance with GAAP.
9.4 Borrower will not make or suffer to exist any
distribution (including any distribution by way of
loan to or investment in) of Borrower's cash or
other assets to its shareholders unless: (a) at the
time of the distribution and after giving effect
thereto, no Event of
-35-
<PAGE> 36
Default or Incipient Default is outstanding; and
(b) after giving effect to the distribution, the
aggregate of all distributions would not exceed
100% of the lesser of (a) net cash flow after debt
service or (b) net income. For purposes of this
paragraph, "net cash flow" means net cash generated
by Borrower's operations and financing for a given
time period determined by subtracting cash outflows
from cash inflows, all in accordance with GAAP. Net
cash flow and net income shall each be determined
on a cumulative basis since December 31, 1992.
9.55 The annual and interim statements of Borrower shall
be accompanied by a certificate signed by its chief
financial officer, certifying Borrower's compliance
with paragraphs 9.2, 9.3 and 9.4 and setting forth
in reasonable detail the calculations upon which
the certification is based.
9.6 In addition to all other fees required to be paid
in connection with the Loan, Borrower shall pay to
Lender a fee ("Custodial Fee") equal to Ten Dollars
($10) per each Instrument which is delivered to
Lender in connection with the Loan and is in the
physical custody of Lender. The Custodial Fee for
an Instrument shall be paid by Borrower to Lender
at the time the Instrument is assigned to Lender.
After the Custodial Fee is paid for an Instrument,
no fee shall be payable to Lender for any
Instrument which is delivered to Lender pursuant to
paragraph 3.2 in replacement of an Instrument for
which Borrower has paid the Custodial Fee. Once a
Custodial Fee has been paid to Lender, Borrower
shall not be entitled to any reimbursement of any
portion thereof. No Custodial Fee shall be payable
to Lender so long as Custodial Agent has possession
of an Instrument, provided that Borrower shall pay
all fees of Custodial Agent.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURES FOLLOW]
-36-
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in their respective names, personally or by their duly authorized
representatives as of the date above written.
"BORROWER" TRENDWEST RESORTS, INC., an
Oregon corporation
By:_____________________________
Print Name:_____________________
Title:__________________________
Address:
4010 Lake Washington
Kirkland, Washington 98033
Telecopy No.: (206) 889-2108
"LENDER" GREYHOUND FINANCIAL CORPORATION a
Delaware corporation
By:______________________________
Print Name:______________________
Title:___________________________
Address:
Dial Corporate Center
1850 N. Central Avenue
Phoenix, Arizona 85077-1141
(Attn: V.P. - Law)
Telecopy No.: (602) 207-5036
-37-
<PAGE> 38
LIST OF EXHIBITS
Schedule 1 Prepayment Schedule
Exhibit A Assignment of Purchase Agreements
Exhibit B Conditions of Eligible Instrument
Exhibit C Environmental Certificate
Exhibit D Promissory Note
Exhibit E Permitted Encumbrances
Exhibit F Description of Projects and Time-Share Interest
Exhibit G Borrower's Certificate
Exhibit G-1 Re-Assignment of Purchase Agreements
Exhibit H-1 Borrower's Opinion of Stoel Rives Boley, Jones &
Grey Counsel
Exhibit H-2 Opinion of John Rogers Burke
Exhibit I Guarantor's Opinion of Counsel
Exhibit J Additional Condition to Advances
Exhibit J-1 Request for Advance and Certification
Exhibit K Borrower's Monthly Reports (Format)
Exhibit L Agreement to Clarify WorldMark Documents
Exhibit M-1 Form of Vacation Club Owners Agreement Used
Generally
Exhibit M-2 Form of Vacation Club Owners Agreement Used in
California
Exhibit M-3 Vacation Club Declaration
Exhibit M-4 Vacation Club Management Agreement
Exhibit M-5 Vacation Club Rules
Exhibit M-6 Articles of Organization of Vacation Club
Association
Exhibit M-7 Vacation Club Program Agreement
Exhibit M-8 Vacation Club Reimbursement Agreement
-38-
<PAGE> 39
Exhibit N OPERF Letter Agreement
-39-
<PAGE> 40
SCHEDULE 1 TO
LOAN AND SECURITY AGREEMENT
The Prepayment Premium at any time shall be equal to a percentage
of the then unpaid principal amount being prepaid, which percentage shall be
determined as follows:
<TABLE>
<CAPTION>
Years After Opening Percentage of
Prepayment Date Prepayment
------------------- ----------------
<S> <C>
1-2 4
3-4 3
5 2
</TABLE>
Year 1 shall be the period of time commencing on the Opening
Prepayment Date and expiring twelve months thereafter. Year 2 begins upon the
expiration of Year 1 (i. e. the first anniversary of the Opening Prepayment
Date), Each succeeding year thereafter commencing with Year 2 shall be for a
period of twelve months, with Year 5 terminating eighty-four (84) months from
the date of the last Advance.
Notwithstanding anything herein to the contrary, Borrower's right
to prepay this Loan is limited to the terms and conditions set forth in the Loan
and Security Agreement.
-40-
<PAGE> 41
EXHIBIT A
ASSIGNMENT OF VACATION CLUB OWNER(S)
TRENDWEST RESORTS, INC,r an Oregon corporation
("Assignor"), as owner and holder of the Vacation Club Owner Agreement (s)
described on Schedule A attached hereto and by this reference incorporated
herein, for good and valuable consideration given to it by GREYHOUND FINANCIAL
CORPORATION, a Delaware corporation ("Assignee"), the receipt whereof is hereby
acknowledged, hereby grants, bargains, sells, assigns, transfers and sets over
unto Assignee its interest in and to such Vacation Club Owner Agreement(s), but
excepting its obligations to the purchasers under such Vacation Club Owner
Agreement(s) ;
TOGETHER WITH any and all promissory note(s)
evidencing the obligations of the purchasers) under the Vacation Club owner
Agreement(s) and other obligations of the purchasers) therein described, all
moneys due and -to become due thereunder, all interest thereon, and all rights
arising therefrom.
IN WITNESS WHEREOF, the Assignor has caused these
presents to be executed the day of
ASSIGNOR:
WITNESS: TRENDWEST RESORTS, INC. , an Oregon
corporation
___________________________________
By:________________________________
Print Name:________________________
Title:_____________________________
STATE OF_________________)
) ss
COUNTY OF________________)
BEFORE ME, the undersigned authority, a Notary
Public in and for said County and State, on this day personally appeared
_________________________, known to me to be the ____________________________
of TRENDWEST RESORTS, INC, an Oregon corporation, who acknowledged this
instrument on behalf of such corporation and that the same was the free act and
deed act of such corporation and that (s)he being authorized by proper authority
to do so, executed the same on behalf of such corporation for the purposes and
consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE, this the ________ day of
____________________, 19___.
-41-
<PAGE> 42
___________________________________
Notary Public in and for___________
County,____________________________.
My commission expires:
______________________
SCHEDULE A TO ASSIGNMENT OF VACATION CLUB OWNER AGREEMENT(S)*
Purchaser No. Date of Original Deferred
Agreement Balance of
Purchase Price
*All of such Vacation Club owner Agreements pertaining to the sale of
memberships and vacation credits in WorldMark, The Club, formerly known as Club
Esprit.
-42-
<PAGE> 43
EXHIBIT B
Conditions of Eligible Instrument
(a) Lender has a valid, direct and perfected first lien/security
interest in the Instrument and security therefor and has a valid
and perfected first priority right to payments.
(b) The Instrument does not represent a sale by Borrower, directly or
indirectly, to any of its shareholders, directors, officers,
partners, as the case may be, its agents, employees or creditors,
or any relative or affiliate of Borrower or the foregoing.
(c) Borrower has received from the Purchaser a minimum cash down
payment of 10% of the total sales price (no part which has been
advanced or loaned to the Purchaser by Borrower, directly or
indirectly).
(d) The Instrument must provide for consecutive monthly
installments of principal and interest in U. S. funds over a
term not exceeding eighty-four (84) months from the date of
its execution, with interest accruing on the unpaid principal
balance at not less that 10% per annum.
(e) The Instrument is at least thirty (30) days aged from the date
of its execution, at least one (1) monthly installment payment
of. principal and interest has been made by the Purchaser (no
part of which has been advanced or loaned to the Purchaser by
Borrower, directly or indirectly), no payment of principal and
interest is more than 29 days past due or has been deferred
past such period, and no payment of assessments levied by
Vacation Club Association against the Time-Share Interests
purchased thereby is more than 90 days past due or has been
deferred past such period.
(f) The Purchaser in all respects, including, without limitation,
its creditworthiness, is reasonably acceptable -to Lender; has
obtained from Borrower good and legal title to the purchased
TimeShare Interests, free and clear of all liens and security
interests other than the security interest granted to
Borrower; and the Purchaser must not have purchased more than
30,000 Vacation Club Credits in the Vacation Club Program.
(g) The Instrument is in form and substance substantially
identical to Exhibit M-1 or M-2 and is valid and enforceable
in accordance with its terms; the Instrument creates a valid,
direct, first security interest in the Vacation Club Credits
purchased thereby; upon the obligor's default under the
Instrument, subject only -to notice and a reasonable grace
period, payment of the balance of the indebtedness owing under
the Instrument may be immediately accelerated and the Time-
Share Interest may be terminated, with the Time-Share Interest
reverting to Borrower.
-43-
<PAGE> 44
(h) The Vacation Club Units and the amenities promised to the
Purchaser have been completed, fully furnished and approved
for occupancy (or completion and furnishing is guaranteed in
a reasonable period of time, to the satisfaction of Lender in
its sole and absolute discretion) and the furnishings in those
Vacation Club Units are free of any lien except for the
Permitted Encumbrances and the Vacation Club Declarations; no
Vacation Club Unit is subject to partition and the time-share
use of the Vacation Club Units and amenities conform to all
applicable restrictions and laws, necessary approvals having
been obtained.
(i) The Instrument and the related sale transaction comply with
all applicable laws; Borrower has performed all its
obligations due to the Purchaser and there are no executory
obligations to the Purchaser to be performed by Borrower,
except those described in the Vacation Club Owner Agreement;
and the Purchaser does not have any right of rescission, set-
off, abatement, counterclaim or the like.
(j) The Purchaser is a United States or Canadian resident, unless the
Purchasers of at least 90% of Time-Share Interests for which
Lender holds Instruments that are used in making Borrowing Base
computations are United States or Canadian
residents.
-44-
<PAGE> 45
EXHIBIT C
ENVIRONMENTAL CERTIFICATE WITH
REPRESENTATIONS, COVENANTS AND WARRANTIES
The undersigned TRENDWEST RESORTS, INC, , an Oregon corporation
("Indemnitor") . hereby executes this Certificate for the purpose of inducing
GREYHOUND FINANCIAL CORPORATION, a Delaware corporation ("Lender"), to make a
loan to it in a principal amount not to exceed at any time FIVE MILLION DOLLARS
($5,000,000.00) ("Loan"), The Loan is to be secured, directly or indirectly, by,
among other things, receivables arising from the sale of vacation credits and
memberships in the vacation club program ("Vacation Club Program") operated by
World Mark, The Club, and sold by Indemnitor, which give the purchasers the
right to use units in the condominium projects more particularly described in
Exhibit A attached hereto and made a part hereof and other units in other
projects which may be added to the Vacation Club Program (such projects,
collectively, "Property"). The documents now or hereafter evidencing, securing
or otherwise pertaining to the Loan are collectively referred to in this
Certificate as the "Loan Documents".
1. Representations, Covenants and Warranties, Except as may be
otherwise expressly stated in the Disclosure Schedule attached
hereto as Exhibit C and made a part hereof, Indemnitor hereby
represents, covenants and warrants to Lender and its successors
and assigns, as follows:
a. No substances known or suspected to pose a threat
to health or the environment ("Hazards") or
"hazardous substances" as defined below by
Applicable Environmental Laws in effect on the date
of the initial Advance (as defined in the Loan
Agreement) have been disposed of or otherwise
released in any material quantity or -are present
in any material quantity, on, over, beneath, in, or
upon the Developed Property (as defined in Exhibit
B) or, to -the knowledge! and belief of Indemnitor,
any adjacent parcels of real estate or any other
portion of the Property. Indemnitor will not cause
any Hazards or "hazardous substances" in any
material quantity to be disposed of or released or
present on, over, beneath, in or upon the Property,
or permit the Vacation Club Association (as defined
in the Loan Agreement) or the Owners (as defined in
the Loan Agreement) to take any such action.
Indemnitor will not cause any disposal or release
of "hazardous substances" on, over, beneath, in or
upon any parcels of property adjacent to the
Property and will use reasonable efforts to
preclude any disposal or release of "hazardous
substances" by it, the Vacation Club Association
and the owners in violation of Applicable
Environmental Laws, on, over, beneath, in or upon
the Property or any parcels of property adjacent to
-45-
<PAGE> 46
the Developed Property. To the knowledge and belief
of Indemnitor, no prior use of the Developed
Property either by Indemnitor or the prior owners
of the Developed Property or any other person or
entity has occurred which violates any "Applicable
Environmental Laws" as defined below. The terms
"hazardous substance", "release", "solid waste" and
"disposal" (or "disposed") shall each have the
broadest meanings specified in the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended ("CERCLA") , the Resource
Conservation and Recovery Act of 1987, as amended
("RCRA"), the Toxic Substance Control Act, the
Clean Air Act, the Clean Water Act. and any other
federal, state or local law, ordinance, code, rule,
regulation, order or decree relating to or imposing
liability or standards of conduct concerning any
hazardous, toxic or dangerous waste or material, as
now or at any time hereafter in effect ("Applicable
Environmental Laws") , Notwithstanding the
foregoing, for purposes of this Certificate the
terms "Hazards" and "hazardous substances" shall be
limited to substances in concentrations and under
conditions that require remedial or removal action
under the Applicable Environmental Laws. "Material
quantity" when used in reference to Hazards or
"hazardous substances" herein shall mean such
Hazards or "hazardous substances" in concentrations
and under conditions that require remedial or
removal action under the Applicable Environmental
Laws.
b. To the knowledge and belief of Indemnitor, there
are no on-site or off-site locations where
hazardous substances, including such substances as
asbestos and polychlorinated biphenyls, or Hazards
from the Property have been disposed of.
c. To the knowledge and belief of Indemnitor, there
has been no litigation brought or threatened nor
any settlement reached with any parties alleging
the presence, disposal, release, or threatened
release, of any hazardous substance or Hazards on,
over, beneath, in or upon the Property.
d. To the knowledge and belief of Indemnitor, after
diligent investigation and inquiry with respect to
the Developed Property, the Property is not on the
CERCLA NATIONAL PRIORITY LIST or the State of
Oregon Confirmed Release list, and not on EPA's
Comprehensive Response, Compensation & Liability
System (CERCLIS) list or on any state environmental
agency list of sites under consideration for
CERCLIS or sites on which leaking underground
storage tanks have existed, or sites subject to any
environmentally related liens.
-46-
<PAGE> 47
e. Without limiting the generality of any other
provision of the documents executed in connection
with the Loan, the representations and warranties
contained in this Certificate related to the
Property shall be deemed to be made by Indemnitor
as to each project added to the Vacation Club
Program at the time of its addition.
f. Where a representation or warranty is expressly
limited to the knowledge and belief of Borrower,
such representation and warranty is made without
the requirement for any investigation or inquiry of
sources other than officers of Borrower having
management responsibility for such matters, except
as expressly provided in paragraph l,d.
2. Covenant to Clean Up and Notify. If Indemnitor causes any
Hazards or hazardous substances to be disposed of or released
on,, in,, from or affecting any portion of the Property or
permits the Vacation Club Association or the Owners to take
any such action, Indemnitor shall promptly clean up and remove
or otherwise properly manage such hazardous substances or
Hazards in accordance with all Applicable Environmental Laws,
to the reasonable satisfaction of Lender and shall provide
Lender, within thirty (30) days after demand by Lender, with
a bond, letter (of credit, or similar financial assurance
evidencing to Lender's satisfaction that sufficient funds are
available to pay the cost of removing, treating, and disposing
of such hazardous substances or Hazards and discharging any
assessments that may be established on the Property as a
result thereof.
3. Site Assessment. If Lender shall have reason to believe that
there are hazardous substances or Hazards affecting any of the
Developed Property, Lender (by its officers, employees and
agents) at any time and from time to time, either prior to or
after the occurrence of an Event of Default under the Loan
Documents, may contract for the services of persons (the "Site
Reviewers") to enter upon such Developed Property and perform
environmental site assessments ("Site Assessments") for the
purpose of determining whether there exists any environmental
condition that could result in any liability, cost, or expense
to the owner, occupier, or operator of such Developed Property
arising under any Applicable Environmental Laws, provided that
Lender shall be responsible for any injury, loss or damage
(including damage -to the Developed Property) caused by,
arising out of or in any way relating to the Site Assessments.
Lender shall notify Indemnitor of, and cooperate with
Indemnitor with respect to, the Site Assessments in order to
minimize interference with Indemnitor's use of the Developed
Property. The Site Reviewers shall perform such tests on the
property as may be necessary to conduct the Site Assessments
in the reasonable opinion of the Site Reviewers.
-47-
<PAGE> 48
Lender acknowledges that Indemnitor's right of access to the
Property is limited and that the right of access granted under
this paragraph is limited to the extent of Indemnitor's right of
access. Indemnitor will supply such information and make
available appropriate personnel as requested by the Site
Reviewers. on request, Lender shall make the results of such Site
Assessments fully available to Indemnitor.
4. Indemnification, Indemnitor covenants that Indemnitor will
indemnify, defend and hold harmless Lender and any current or
former officer, director, employee, shareholder or agent of
Lender (collectively, the "Indemnitees") for, from and against
any and all claims, losses, damages, response costs, clean-up
costs and expenses arising out of or in any way relating to
the existence of hazardous substances, solid waste or Hazards
over, beneath, in or upon the Property or a breach of the
representations, warranties, covenants and agreements set
forth in Paragraph El (collectively referred to herein as
"Claim" or "Claims"), including, but not limited to:
(a) claims of third parties (including governmental agencies) for
damages, penalties, response costs, clean-up costs, injunctive or
other relief; (b) costs and expenses of removal and restoration,
including fees of attorneys and experts, and costs of reporting
the existence of hazardous substances, solid waste or Hazards to
any governmental agency; and (c) any and all expenses or
obligations, including reasonable attorneys' fees, incurred at,
before and after any trial or appeal therefrom whether or not
taxable as costs, including, without limitation, reasonable
attorneys fees, witness fees, deposition costs, copying and
telephone charges and other expenses, -all of which shall be paid
by Indemnitor upon demand; provided, however, that this covenant
to indemnify shall not extend to Claims with respect to a
Property made on account of the storage, disposal or release of
hazardous substances or Hazards by any person other than
Indemnitor, its employees, agents or independent contractors
after Indemnitor ceases to possess an interest in the affected
Property.
5. Lender's Right to Remove Hazardous Materials. Lender shall
have the right, but not the obligation, without in any way
limiting Lender's other rights and remedies under the Loan
Documents, to enter onto the Developed Property or to take
such other actions as it deems necessary or advisable to clean
up, remove, resolve, or minimize the impact of, or otherwise
deal with, any hazardous substances, solid wastes or Hazards
on or affecting the Developed Property ("Lender's Cleanup
Action") following receipt of any notice from any person or
entity asserting the existence of any hazardous substances,
solid wastes or Hazards pertaining to the Developed Property
or any part of it that, if true, could result in an order,
notice, suit, imposition of a lien on the Property, or other
action or that, in Lenders sole and absolute judgment, could
expose Lender to liability or loss, provided that Lender shall
give Indemnitor the opportunity to perform Lender's Cleanup
-48-
<PAGE> 49
Action before commencing such Lender's Cleanup Action itself, and
further provided that Lender shall be responsible for any
-49-
<PAGE> 1
EXHIBIT 10.12
EXECUTION COPY
TRENDWEST RESORTS, INC.,
as Originator
and
TW HOLDINGS, INC.,
as Buyer
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 1, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS
<S> <C>
Section 1.01. Definitional Provisions................................................. -1-
Section 1.02. Certain Other Definitional Provisions................................... -2-
ARTICLE TWO
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Right to Use Receivables.................................. -2-
Section 2.02. Representations and Warranties as to
the Originator............................................... -4-
Section 2.03. Representations and Warranties as to
the Right to Use Receivables;
Repurchase Upon Breach....................................... -7-
Section 2.04. Affirmative Covenants of the Originator................................. -8-
Section 2.05. Negative Covenants of the Originator.................................... -10-
ARTICLE THREE
PAYMENT OF PURCHASE PRICE
Section 3.01. Payment of Purchase Price............................................... -11-
ARTICLE FOUR
TERMINATION
Section 4.01. Termination............................................................. -11-
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment............................................................... -12-
Section 5.02. Protection of Right, Title and Interest
to Right to Use Receivables.................................. -12-
Section 5.03. Governing Law........................................................... -13-
Section 5.04. Notices................................................................. -13-
Section 5.05. Severability of Provisions.............................................. -13-
Section 5.06. Assignment.............................................................. -14-
Section 5.07. Further Assurances...................................................... -14-
Section 5.08. No Waiver; Cumulative Remedies.......................................... -14-
Section 5.09. Counterparts............................................................ -14-
Section 5.10. Third-Party Beneficiaries............................................... -14-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.11. Merger and Integration........................................ -14-
Section 5.12. Headings...................................................... -14-
Section 5.13. Originator Indemnification.................................... -15-
Section 5.14. Assumption of the Obligations of the
Originator........................................... -15-
Schedule A Schedule of Right to Use Receivables.......................... SA-1
Exhibit A Form of UCC-1................................................. A-1
</TABLE>
-ii-
<PAGE> 4
RECEIVABLES PURCHASE AGREEMENT, dated as of December 1, 1993, between
TRENDWEST RESORTS, INC., an Oregon corporation, as seller ("TRI" or the
"Originator"), and TW HOLDINGS, INC., a Nevada corporation, as purchaser (the
"Buyer").
RECITALS
WHEREAS, the Buyer is in the business of purchasing from time to time,
among other things, certain right to use timeshare receivables (the "Right to
Use Receivables") originated by the Originator;
WHEREAS, pursuant to a receivables transfer agreement, dated as of the
date of this Agreement (the "Transfer Agreement"), among TW HOLDINGS, INC., as
seller (the "Seller"), the purchasers named therein (the "Purchasers"),
Seattle-First National Bank, as agent (the "Agent"), and JELD-WEN, inc., as
master servicer (the "Master Servicer"), the Purchasers will purchase from time
to time certain Receivables from the Seller which right to use timeshare
receivables (the "Right to Use Receivables") the Seller shall purchase from time
to time from the Originator and which mortgage loan receivables (the "Mortgage
Loan Receivables" and, together with the Right to Use Receivables, the
"Receivables") the Seller shall purchase from time to time from Eagle Crest
Partners, Ltd. ("Eagle Crest" and, together with TRI, the "Originators"); and
WHEREAS, in connection with the transaction contemplated by the
Transfer Agreement, TRI will sell, transfer and assign Right to Use Receivables
to the Buyer from time to time and the Buyer will, among other things, grant a
first perfected security interest in such Right to Use Receivables to the Agent
for the benefit of the Purchasers.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitional Provisions.
(a) Capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed thereto in the Transfer Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section , subsection and
Schedule references contained
<PAGE> 5
in this Agreement are references to Sections , subsections and Schedules in or
to this Agreement unless otherwise specified; with respect to all terms in this
Agreement, the singular includes the plural and the plural includes the
singular; words importing gender include the other gender; references to
"writing" include printing, typing, lithography and other means of reproducing
words in visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to Persons include their permitted successors and assigns;
and the term "including" means "including without limitation."
Section 1.02. Certain Other Definitional Provisions. Whenever
used in this Agreement, the following words and phrases shall have
the following meanings:
"Agreement" shall mean this Receivables Purchase Agreement and all
amendments hereof and supplements hereto.
"Buyer" means TW HOLDINGS, INC., in its capacity as purchaser of the
Right to Use Receivables under this Agreement, and any successor thereto.
"Initial Right to Use Receivables" means the Right to Use Receivables
comprising part of the Receivables Pool as of the Closing Date.
"Schedule of Right to Use Receivables" means the Schedule of Right to
Use Receivables attached as Schedule A hereto and as an Exhibit to the Transfer
Agreement, as it may be amended from time to time.
"Transfer Agreement" means the Receivables Transfer Agreement dated as
of December 1, 1993, among TW HOLDINGS, INC., Seattle- First National Bank, as
Purchaser, Seattle-First National Bank, as Agent, and JELD-WEN, inc,, as Master
Servicer.
"TRI" shall mean Trendwest Resorts, Inc., and any successors
thereto.
ARTICLE TWO
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Right to Use Receivables.
(a) In the case of the Initial Receivables that are Right to Use
Receivables, on the Closing Date the Originator does hereby sell, transfer and
assign to the Buyer, without recourse (subject to its obligations hereunder):
-2-
<PAGE> 6
(i) all right, title and interest of the Originator in and to
the Initial Receivables that are Right to Use Receivables, all Related
Security with respect to such Right to Use Receivables, all related
Receivable Documents and all collections due on or in respect of such
Right to Use Receivables and paid thereon or in respect thereof
(including proceeds of the repurchase of Initial Receivables that are
Right to Use Receivables by the Originator pursuant to Section 2.03(b))
on or after the Initial Cutoff Date;
(ii) the interest of the Originator in the security interests
in and liens on such Right to Use Receivables and any accessions
thereto granted by the Obligors pursuant to such Right to Use
Receivable;
(iii) the interest of the Originator in any proceeds of any
insurance policies covering such Right to Use Receivables and in any
proceeds of any credit life or credit disability insurance policies
relating to such Right to Use Receivables or the related Obligors;
(iv) all proceeds of the foregoing.
(b) In the case of the Subsequent Receivables that are Right to Use
Receivables, on the related Transfer Dates occurring from time to time prior to
the Commitment Termination Date, the Originator will sell, transfer and assign
to the Buyer, without recourse (subject to its obligations hereunder):
(i) all right, title and interest of the Originator in and to
the related Subsequent Receivables that are Right to Use Receivables,
all Related Security with respect to such Right to Use Receivables, all
related Receivable Documents and all collections on or in respect of
such Right to Use Receivables and paid thereon or in respect thereof
(including proceeds of the repurchase of such Subsequent Receivables
that are Right to Use Receivables by the Originator pursuant to Section
2.03(b)) on or after the related Subsequent Cutoff Date;
(ii) the interest of the Originator in the security interests
in and liens on such Right to Use Receivables and any accessions
thereto granted by the Obligors pursuant to such Right to Use
Receivables;
(iii) the interest of the Originator in any proceeds of any
physical damage and title insurance policies covering such Right to Use
Receivables and in any proceeds of any credit life or credit disability
insurance policies relating to such Right to Use Receivables or the
related Obligors;
-3-
<PAGE> 7
(iv) all proceeds of the foregoing.
(c) In connection with each such conveyance, on or prior to the related
Transfer Date, as the case may be, the Originator agrees to record and file, at
its own expense, a financing statement with respect to the related Right to Use
Receivables meeting the requirements of applicable state law in such manner and
in such jurisdictions as are necessary to perfect the sale and assignment of
such Right to Use Receivables to or upon the order of the Buyer, and the
proceeds thereof as may be perfected by filing a financing statement (and any
continuation statements as are required by applicable state law), and to deliver
a file-stamped copy of each such financing statement (or continuation statement)
or other evidence of such filings (which may, for purposes of this Section ,
consist of telephone confirmation of such filing with the file stamped copy of
each such filing to be provided to the Buyer in due course), as soon as is
practicable after the Originator's receipt thereof.
In connection with each such conveyance, the Originator further agrees,
at its own expense, on or prior to the related Transfer Date, (i) to indicate in
its computer files that the related Right to Use Receivables have been
transferred to the Buyer pursuant to this Agreement and (ii) to deliver to the
Buyer a computer file or microfiche list containing a true and complete list of
all such Right to Use Receivables, and containing the information with respect
thereto required by the Schedule of Right to Use Receivables and (iii) to
deliver to the Buyer and the Agent a Schedule of Right to Use Receivables with
respect to such Right to Use Receivables, which shall be added to all Schedules
of Right to Use Receivables delivered to the Buyer and the Agent prior to such
Transfer Date and appears as Schedule A hereto.
(d) On each Transfer Date, the Originator shall deliver to or upon the
order of the Buyer, the documents relating to the related Right to Use
Receivables called for pursuant to Section 2.05 of the Transfer Agreement.
(e) From time to time, the Originator can substitute a new Right to Use
Receivable that is an Eligible Receivable for a Receivable that is either a
Defaulted Receivable or is otherwise no longer an Eligible Receivable, upon the
terms and conditions in Section 15.02 of the Transfer Agreement.
Section 2.02. Representations and Warranties as to the Originator. The
Originator hereby represents and warrants as of the date and execution of this
Agreement, the Closing Date and each Transfer Date that:
(a) Organization and Good Standing. The Originator shall have
been duly organized under the laws of the State of
-4-
<PAGE> 8
Oregon and shall be validly existing as a corporation whose status is
active, with power and authority to own its properties and to conduct
its business as such properties shall be currently owned and such
business is presently conducted, and had at all relevant times, and
shall now have, power, authority and legal right to acquire, own, sell
and service the Right to Use Receivables.
(b) Due Qualification. The Originator shall be duly qualified
to do business as a foreign corporation in good standing, and shall
have obtained all necessary licenses and approvals in all jurisdictions
in which the ownership or lease of property or the conduct of its
business shall require such qualifications, except where the failure to
so qualify or to have obtained such licenses and approvals would not
have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of
the Originator.
(c) Power and Authority. The Originator shall have the power
and authority to execute, deliver and perform its obligations under
this Agreement and each other Facility Document to which it is a party
or by which it is bound and to carry out their respective terms; the
Originator shall have full power and authority to sell and assign the
Right to Use Receivables to be sold and assigned to and deposited with
the Buyer and shall have duly authorized such sale and assignment to
the Buyer by all necessary corporate action; and the execution,
delivery and performance of this Agreement and each other Facility
Document to which it is a party or by which it is bound shall have been
duly authorized by the Originator by all necessary corporate action.
(d) Valid Transfer and Assignment; Binding Obligations. This
Agreement shall evidence a valid transfer and assignment of the Right
to Use Receivables, enforceable against creditors of and purchasers
from the Originator; and shall constitute a legal, valid and binding
obligation of the Originator enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights in general and by general principles of equity,
regardless of whether such enforceability shall be considered in a
proceeding in equity or at law.
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Facility
Documents to which the Originator is a party or by which it is
bound and the fulfillment of the terms of this Agreement shall
not conflict with, result in any breach of any of the terms
and provisions of, nor constitute (with or without notice or
-5-
<PAGE> 9
lapse of time) a default under, the articles of incorporation or bylaws
of the Originator, or conflict with or violate any of the material
terms or provisions of, or constitute (with or without notice or lapse
of time) a default under, any indenture, agreement or other instrument
to which the Originator is a party or by which it shall be bound; nor
result in the creation or imposition of any Lien upon any of its
properties pursuant to the terms of any such indenture, agreement or
other instrument (other than the Lien created by this Agreement, the
Lien created by the Transfer Agreement and the Liens of WorldMark); nor
violate any law or, to the best of the Originator's knowledge, any
order, rule or regulation applicable to it of any court or of any
federal or state regulatory body, administrative agency or other
Governmental Authority having jurisdiction over it or its properties;
which breach, default, conflict, lien or violation would have a
material adverse effect on its condition, financial or otherwise, or
its earnings, business affairs or business prospects.
(f) No Proceedings. There are no proceedings or investigations
pending, or to the best of the Originator's knowledge, threatened,
before any court, regulatory body, administrative agency or other
Governmental Authority having jurisdiction over it or its properties:
(i) asserting the invalidity of any other Facility Document to which it
is a party or by which it is bound, (ii) seeking to prevent the
consummation of any of the transactions contemplated by any Facility
Document to which it is a party or by which it is bound, or (iii)
seeking any determination or ruling that might materially and adversely
affect the performance by the Originator of its obligations under, or
the validity or enforceability of any Facility Document to which it is
a party or by which it is bound.
(g) Government Approvals. No authorization or approval or
other action by, and no notice to or filing with, any Governmental
Authority is required for the due execution, delivery and performance
by the Originator of any Facility Document to which it is a party by
which it is bound with the transactions contemplated thereby except
such as have been obtained prior to the date of this Agreement and are
in full force and effect (copies of which have been delivered to the
Buyer and the Agent).
(h) Licenses. The Originator holds, and at all times during
the term of this Agreement will hold, all material licenses,
certificates, franchises and permits from all Governmental Authorities
necessary for the conduct of its business and has received no notice of
proceedings relating to the revocation of any such license,
certificate, franchise or
-6-
<PAGE> 10
permit, which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect its ability to perform its obligations under any Facility
Agreement to which it is a party or by which it is bound or any other
documents or transactions contemplated hereunder or thereunder or the
validity or enforceability of the Right to Use Receivables.
(i) Offices. The principal place of business and chief
executive office of TRI is located at the address set forth in Section
5.04.
(j) Taxes. The Originator has filed all tax returns and
reports required of it, has paid all Taxes which are due and payable
and has provided adequate reserves for payment of any Tax whose payment
is being contested; all charges, accruals and reserves on its books in
respect of Taxes for all fiscal periods to date are accurate; and there
are no material questions or disputes between the Originator and any
Governmental Authority with respect to any Taxes.
(k) Compliance with Applicable Laws. The Originator is in
material compliance with the requirements of all applicable laws,
rules, regulations and orders of all Governmental Authorities.
(1) Ownership Interests. The Originator is a wholly owned
subsidiary of JELD-WEN.
The representations and warranties set forth in this Section shall
survive the transfer and assignment of the related Right to Use Receivables to
the Buyer on the related Transfer Date and the transfer and assignment of such
Right to Use Receivables by the Buyer to the Purchasers pursuant to the Transfer
Agreement. Each of the Originator and the Buyer shall inform the other party
promptly, in writing, upon the discovery of any breach of the foregoing
representations and warranties.
Section 2.03. Representations and Warranties as to the Right
to Use Receivables; Repurchase Upon Breach.
(a) In connection with each transfer of Right to Use Receivables to the
Buyer, as of the related Transfer Date, each such Right to Use Receivable
satisfies each of the representations and warranties set forth in Section 7.02
of the Transfer Agreement.
(b) The representations and warranties set forth in this Section shall
survive the transfer and assignment of the Right to Use Receivables to the Buyer
and the transfer and assignment of such Right to Use Receivables by the Buyer to
the Purchasers pursuant to the Transfer Agreement. Each of the Originator and
the
-7-
<PAGE> 11
Purchaser shall inform the other party promptly, in writing, upon the discovery
of any breach of the Originator's representations and warranties pursuant to
Section 2.03(a) which materially and adversely affects any Right to Use
Receivable. Unless the breach shall have been cured in all material respects by
the 60th day following its discovery, the Originator will repurchase such Right
to Use Receivable by remitting an amount equal to the related Purchase Amount to
or upon the order of the Buyer. The sole remedy of the Buyer with respect to a
breach of the foregoing representations and warranties which materially and
adversely affects any Right to Use Receivable shall be to require the Originator
to repurchase such Right to Use Receivable.
(c) Upon the payment by the Originator of the Purchase price for any
Right to Use Receivable repurchased pursuant to this Section , the Buyer shall
cause such instruments as may be necessary to assign and transfer, without
recourse or warranty of any kind, such Right to Use Receivable and the related
Related Security and Receivable Documents to the Originator.
Section 2.04. Affirmative Covenants of the Originator. The Originator
hereby covenants that from the date hereof until the first day following the
Commitment Termination Date on which (1) the Outstanding Principal Balance of
the Right to Use Receivables comprising part of the Receivables Pool shall be
reduced to zero and (ii) all Obligations shall have been fully paid and
performed, the Originator shall do all of the following unless the Buyer or the
Agent (acting upon the direction of the Required Purchasers) shall otherwise
consent in writing:
(a) The Originator shall comply in all material respects with
all applicable laws, rules, regulations and orders, including but not
limited to all applicable laws, rules, regulations and orders with
respect to the Right to Use Receivables and the Assigned Collateral
relating thereto and will take all actions necessary to ensure that all
Taxes, pension obligations and other governmental claims in respect of
its operations, business and assets are properly paid when due.
(b) The Originator shall preserve and maintain its corporate
existence, rights, franchises and privileges in the State of Oregon,
and qualify and remain qualified in good standing as a foreign
corporation in each State where such qualification is necessary or
advisable in view of its operations, business and assets.
(c) From time to time during regular business hours and upon
at least three days' prior written notice, the Originator shall permit
the Buyer, the Agent, any Purchaser and their respective agents and
representatives (i) to examine and make
-8-
<PAGE> 12
copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the
possession or under the control of the Originator and (ii) to visit the
offices and properties of the Originator for the purpose of examining
such materials and to discuss matters relating to the Right to Use
Receivables, the performance of the Originator under any Facility
Document to which it is a party or by which it is bound and affairs,
finances and accounts of the Originator generally with any of its
officers, directors or employees.
(d) The Originator shall comply in all material respects with
the Credit and Collection Policy in connection with the Right to Use
Receivables.
(e) Promptly after learning thereof, the Originator will
notify the Buyer and the Agent of (i) the details of any action,
proceeding, investigation or claim against or affecting it instituted
before any court, arbitrator or Governmental Authority or, to its
knowledge threatened to be instituted, which, if determined adversely
would be likely to have a material adverse effect on (A) the
performance by it of any obligations under any Facility Document to
which it is a party or by which it is bound, (B) the validity or
enforceability of any Facility Document to which it is a party or by
which it is bound, (C) the validity or enforceability of any Right to
Use Receivable or (D) the first priority interest of the Agent on
behalf of the Purchasers in the Assigned Collateral relating to the
Right to Use Receivables; (ii) any material dispute between the
Originator and any Governmental Authority; (iii) any labor controversy
which has resulted in or threatens to result in a strike which would
materially affect the business operations of the Originator; and (iv)
the occurrence of any Termination Event relating to the Originator.
(g) From time to time the Originator will (i) pay or reimburse
the Buyer, the Agent and each Purchaser for all Taxes imposed on this
Agreement and for all expenses including legal fees incurred in
connection with the enforcement by judicial proceedings or otherwise of
any of the rights of the foregoing parties under this Agreement or
under any other Facility Document to which the Originator is a party or
by which it is bound; (ii) pay or reimburse the Agent for all expenses,
including legal fees, incurred by or on behalf of the Buyer in
connection with the perfection of the Buyer's interest in the Assigned
Collateral relating to the Right to Use Receivables; (iii) obtain and
promptly furnish to the Agent evidence of all such government approvals
as may be required to enable the Originator to comply with its
obligations under any Facility Document to which it is a party
-9-
<PAGE> 13
or by which it is bound; (iv) execute and deliver all such instruments
(including UCC continuation statements) and perform all such other acts
as may be necessary to maintain the Purchasers' interest continuously
perfected as a first priority interest in the Assigned Collateral
relating to the Right to Use Receivables; (v) execute and deliver all
such other instruments and perform all such other acts as the Buyer,
the Agent or any Purchaser may reasonably request to carry out the
transactions contemplated by this Agreement and the other Facility
Documents to which it is a party or by which it is bound; and (f)
comply in all material respects with the obligations of the Originator
under the Facility Documents.
(h) The Originator agrees to deliver in kind upon receipt to
the Master Servicer all Collections received by the Originator in
respect of any Right to Use Receivable after the related Transfer Date
as soon as practicable after receipt thereof, but in any event no later
than two Business Days following such receipt.
On the last Business Day of each month but in any event no later than
five days subsequent to the last Business Day of each month, the Originator
shall provide to the Buyer such information as is reasonably necessary for the
Buyer to determine the Consolidated Delinquency Date Amount, the Consolidated
Defaulted Receivable Amount and the Consolidated Monthly Charge-off Date.
Section 2.05. Negative Covenants of the Originator. From the date
hereof until the first day following the Commitment Termination Date on which
(i) the Outstanding Principal Balance of the Right to Use Receivables comprising
part of the Receivables Pool shall be reduced to zero and (ii) all Obligations
shall have been fully paid and performed, the Originator shall refrain from
doing any of the following, unless the Buyer or the Agent (acting upon the
direction of the Required Purchasers) shall otherwise consent in writing:
(a) Except for the conveyances hereunder, the Originator will
not sell, pledge, assign or transfer to any other Person, or grant,
create, incur, assume or suffer to exist any Lien on any Right to Use
Receivable or any related Related Security or Receivable Document,
whether now existing or hereafter created, or any interest therein; the
Originator will immediately notify the Buyer and the Agent of the
existence of any Lien on any Right to Use Receivable or any related
Related Security or Receivable Document and such Right to Use
Receivable will be repurchased from the Buyer by the Originator in the
manner and with the effect specified in Section 2.03(b), and the
Originator shall defend the right, title and interest of the Buyer in,
to and under the Right to
-10-
<PAGE> 14
Use Receivables, whether now existing or hereafter created, against all
claims of third parties claiming through or under the Originator;
provided, however, that nothing in this subsection shall prevent or be
deemed to prohibit the Originator from suffering to exist upon any of
the Right to Use Receivables or any related Related Security or
Receivable Document, Liens in favor of WorldMark, Liens for municipal
or other local taxes if such taxes shall not at the time be due and
payable or if the Originator shall currently be contesting the validity
of such taxes in good faith by appropriate proceedings and shall have
set aside on its books adequate reserves with respect thereto.
(b) After the Transfer Date relating to a Right to Use
Receivable, the Originator shall take no action, nor omit to take any
action, which would impair the rights of the Buyer in such Right to Use
Receivable.
(c) The Originator shall not, during the term of this
Agreement, transfer to the Buyer Right to Use Receivables on forms
substantially different from the forms attached as Exhibits to the
Transfer Agreement.
ARTICLE THREE
PAYMENT OF PURCHASE PRICE
Section 3.01. Payment of Purchase Price. In consideration of the sale
from the Originator to the Buyer, as provided in Section 2.01, of (a) the
Initial Receivables that are Right to Use Receivables on the Closing Date, the
Buyer agrees to pay the Originator an amount equal to the Outstanding Principal
Balance of such Right to Use Receivables as of the Initial Cutoff Date, plus
accrued interest to the date of purchase and (b) the Subsequent Receivables that
are Right to Use Receivables, on the related Transfer Dates, the Buyer agrees to
pay the Originator an amount equal to the Outstanding Principal Balance of such
Right to Use Receivables as of the related Subsequent Cutoff Date.
ARTICLE FOUR
TERMINATION
Section 4.01. Termination. The respective obligations and
responsibilities of the Originator and the Buyer created hereby shall terminate,
except for indemnity obligations as provided herein, upon the termination of the
Transfer Agreement.
-11-
<PAGE> 15
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment.
(a) This Agreement may be amended from time to time in writing by the
Buyer and the Originator, with the consent of the Agent, which consent shall not
be unreasonably withheld, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein, or
to add any other provisions with respect to matters or questions arising under
this Agreement which shall not be inconsistent with the provisions of this
Agreement or the Transfer Agreement; provided, however, that such action shall
not, as evidenced by an opinion of counsel delivered to the Buyer and the Agent,
adversely affect in any material respect the interests of the Buyer or the
Purchasers in any Right to Use Receivables or Assigned Collateral related
thereto.
(b) This Agreement may also be amended from time to time in writing by
the Buyer and the Originator, with the consent of the Agent (acting upon the
direction of the Required Purchasers) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement.
Section 5.02. Protection of Right, Title and Interest to
Right to Use Receivables.
(a) The Originator at its expense shall cause this Agreement, all
amendments hereto and/or all financing statements and continuation statements
and any other necessary documents covering the Buyer's right, title and interest
to the Right to Use Receivables and other property conveyed by the Originator to
the Buyer hereunder to be promptly recorded, registered and filed, and to be at
all times kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Buyer hereunder to all of the Right to Use Receivables and
such other property. The Originator shall deliver to the Buyer file-stamped
copies of, or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration or
filing. The Buyer and the Agent shall cooperate fully with the Originator in
connection with the obligations set forth above and will execute any and all
documents reasonably required to fulfill the intent of this Section .
(b) Within 30 days after the Originator makes any change in its name,
identity or corporate structure which would make any financing statement or
continuation statement filed in accordance
-12-
<PAGE> 16
with paragraph (a) above seriously misleading within the meaning of Section
9-402(7) of the UCC as in effect in the applicable state, it shall give the
Buyer and the Agent notice of any such change and shall execute and file such
financing statements or amendments as may be necessary to continue the
perfection of the Buyer's security interest in the Right to Use Receivables and
the Assigned Collateral relating thereto.
(c) The Originator will give the Buyer and the Agent prompt written
notice of (i) any relocation of any office at which it keeps records concerning
the Right to Use Receivables or of its principal executive office and (ii)
whether, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall execute and
file such financing statements or amendments as may be necessary to continue the
perfection of the interest of the Buyer in the Right to Use Receivables and the
Assigned Collateral relating thereto.
Section 5.03. Governing Law. This Agreement and the other facility
documents shall be governed by and construed in accordance with the internal
laws of the State of Oregon, except to the extent that the perfection (and the
effect of perfection or nonperfection) of the interests of the lenders in the
receivables, loan documents, related security, assigned collateral, facility
documents and collections is governed by the laws of a jurisdiction other than
the state of Oregon.
Section 5.04. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, return receipt requested,
to (a) in the case of the Buyer, to TW HOLDINGS, INC., P.O. Box 1329, 3250
Lakeport Boulevard, Klamath Falls, Oregon 97601, Attention: R.C. Wendt and Gary
A. Florence; (b) in the case of TRI, to TRI, the Originator, TRENDWEST RESORTS,
INC., 4010 Lake Washington Boulevard, Suite #300, Kirkland, Washington 98033,
Attention: Jeffrey P. Sites and Gary A. Florence; or (c) as to either of such
Persons, at such other address as shall be designated by such Person in a
written notice to the other Person.
Section 5.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
-13-
<PAGE> 17
Section 5.06. Assignment. This Agreement may not be assigned by the
Buyer or the Originator except as contemplated by this Section or the Transfer
Agreement; provided, however, that simultaneously with the execution and
delivery of this Agreement, the Buyer shall assign all of its right, title and
interest herein to the Agent for the benefit of the Purchasers as provided in
the Transfer Agreement, to which the Originator hereby expressly consents.
Section 5.07. Further Assurances. The Originator and the Buyer agree to
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the other party hereto
more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements, amendments, continuation
statements or releases relating to the Right to Use Receivables for filing under
the provisions of the UCC or other law of any applicable jurisdiction.
Section 5.08. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Buyer or the Originator, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 5.09. Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be an original, but
all of which together shall constitute one and the same instrument.
Section 5.10. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, for the benefit of the
Agent and the Purchasers, which shall be considered to be a third-party
beneficiary hereof. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder.
Section 5.11. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 5.12. Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
-14-
<PAGE> 18
Section 5.13. Originator Indemnification. The Originator shall
indemnify and hold harmless the Buyer from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts, omissions
or alleged acts or omissions arising out of activities of the Originator
pursuant to this Agreement or as a result of the transactions contemplated
hereby, including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided, however, that the Originator shall not indemnify the Buyer if such
acts, omissions or alleged acts or omissions constitute negligence or willful
misconduct by the Agent or any Purchaser.
Section 5.14. Assumption of the Obligations of the Originator. The
obligations of the Originator hereunder shall not be assignable nor shall any
Person succeed to the obligations of the Originator hereunder except in each
case in accordance with the provisions of Section 5.06.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
TRENDWEST RESORTS, INC.,
as Originator
By:
---------------------------------
Jeffery P. Sites
Secretary
TW HOLDINGS, INC.,
as Buyer
By:
---------------------------------
R.C. Wendt
President
ACCEPTED:
SEATTLE-FIRST NATIONAL
BANK, as Agent
By:
------------------------------
Ken Puro
Assistant Vice President
-15-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
TRENDWEST RESORTS, INC.,
as Originator
By:
------------------------------
Jeffery P. Sites
Secretary
TW HOLDINGS, INC.,
as Buyer
By:
------------------------------
R.C. Wendt
President
ACCEPTED:
SEATTLE-FIRST NATIONAL
BANK, as Agent
By:
--------------------------------
Ken Puro
Assistant Vice President
-16-
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
TRENDWEST RESORTS, INC.,
as Originator
By:
-----------------------------------
Jeffery P. Sites
Secretary
TW HOLDINGS, INC.,
as Buyer
By:
-----------------------------------
R.C. Wendt
President
ACCEPTED:
SEATTLE-FIRST NATIONAL
BANK, as Agent
By:
------------------------------
Ken Puro
Assistant Vice President
-17-
<PAGE> 1
EXHIBIT 10.13
EXECUTION COPY
EAGLE CREST PARTNERS, LTD.,
as Originator
and
TW HOLDINGS, INC.,
as Buyer
RECEIVABLES PURCHASE AGREEMENT
Dated as of December 1, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Pages
-----
ARTICLE ONE
DEFINITIONS
<S> <C> <C>
Section 1.01. Definitional Provisions................................................. 1
Section 1.02. Certain Other Definitional Provisions................................... 2
ARTICLE TWO
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Mortgage Loan Receivables................................. 2
Section 2.02. Representations and Warranties as to the
Originator..................................................... 5
Section 2.03. Representations and Warranties as to the
Mortgage Loan Receivables: Repurchase Upon
Breach......................................................... 8
Section 2.04. Affirmative Covenants of the Originator................................. 8
Section 2.05. Negative Covenants of the Originator.................................... 11
ARTICLE THREE
PAYMENT OF PURCHASE PRICE
Section 3.01. Payment of Purchase Price............................................... 12
ARTICLE FOUR
TERMINATION
Section 4.01. Termination............................................................. 12
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment............................................................... 12
Section 5.02. Protection of Right, Title and Interest to
Mortgage Loan Receivables...................................... 13
Section 5.03. Governing Law........................................................... 13
Section 5.04. Notices................................................................. 14
Section 5.05. Severability of Provisions.............................................. 14
Section 5.06. Assignment.............................................................. 14
Section 5.07. Further Assurances...................................................... 14
Section 5.08. No waiver; Cumulative Remedies.......................................... 14
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
Section 5.09. Counterparts............................................... 14
Section 5.10. Third-Party Beneficiaries.................................. 15
Section 5.11. Merger and Integration..................................... 15
Section 5.12. Headings................................................... 15
Section 5.13. Originator Indemnification................................. 15
Section 5.14. Assumption of the Obligations of the
Originator........................................ 15
Schedule A Schedule of Mortgage Loan Receivables...................... SA-1
Exhibit A Form of UCC-1..................................... A-1
</TABLE>
-ii-
<PAGE> 4
RECEIVABLES PURCHASE AGREEMENT, dated as of December 1, 1993, between
Eagle Crest Partners, Ltd., an Oregon limited partnership, as seller ("Eagle
Crest" or the "Originator"), and TW HOLDINGS, INC., a Nevada corporation, as
purchaser (the "Buyer").
RECITALS
WHEREAS, the Buyer is in the business of purchasing from time to time,
among other things, certain mortgage loan timeshare receivables (the "Mortgage
Loan Receivables") originated by the Originator;
WHEREAS, pursuant to a receivables transfer agreement, dated as of the
date of this Agreement (the "Transfer Agreement"), among TW HOLDINGS, INC, as
seller (the "Seller"), the purchasers named therein (the "Purchasers"),
Seattle-First National Bank, as agent (the "Agent"), and JELD-WEN, inc., as
master servicer (the "Master Servicer"), the Purchasers will purchase from time
to time certain Receivables from the Seller which mortgage loan receivables (the
"Mortgage Loan Receivables") the Seller shall purchase from time to time from
the Originator and which right to use timeshare receivables (the "Right to Use
Receivables" and, together with the Mortgage Loan Receivables, the
"Receivables") the Seller shall purchase from time to time from Trendwest
Resorts, Inc. ("TRI" and, together with Eagle Crest, the "Originators"); and
WHEREAS, in connection with the transaction contemplated by the
Transfer Agreement, Eagle Crest will sell, transfer and assign Mortgage Loan
Receivables to the Buyer from time to time and the Buyer will, among other
things, grant a first priority perfected security interest in such Mortgage Loan
Receivables to the Agent for the benefit of the Purchasers.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE ONE
DEFINITIONS
Section 1.01. Definitional Provisions.
(a) Capitalized terms used herein that are not otherwise defined shall
have the meanings ascribed thereto in the Transfer Agreement.
(b) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; Section , subsection and
Schedule references contained in this Agreement are references to Sections ,
subsections and Schedules in or to this Agreement unless otherwise specified;
with
-1-
<PAGE> 5
respect to all terms in this Agreement, the singular includes the plural and the
plural includes the singular; words importing gender include the other gender;
references to "writing" include printing, typing, lithography and other means of
reproducing words in visible form; references to agreements and other
contractual instruments include all subsequent amendments thereto or changes
therein entered into in accordance with their respective terms and not
prohibited by this Agreement; references to Persons include their permitted
successors and assigns; and the term "including" means "including without
limitation."
Section 1.02. Certain Other Definitional Provisions. Whenever used in
this Agreement, the following words and phrases shall have the following
meanings:
"Agreement" shall mean this Receivables Purchase Agreement and all
amendments hereof and supplements hereto.
"Buyer" means TW HOLDINGS, INC., in its capacity as purchaser of the
Mortgage Loan Receivables under this Agreement, and any successor thereto.
"Eagle Crest" shall mean Eagle Crest Partners, Ltd. and any successors
thereto.
"Initial Mortgage Loan Receivables" means the Mortgage Loan Receivables
comprising part of the Receivables Pool as of the Closing Date.
"Schedule of Mortgage Loan Receivables" means the Schedule of Mortgage
Loan Receivables attached as Schedule A hereto and as an Exhibit to the Transfer
Agreement, as it may be amended from time to time.
"Transfer Agreement" means the Receivables Transfer Agreement dated as
of December 1, 1993, among TW HOLDINGS, INC., Seattle-First National Bank, as
Purchaser, Seattle-First National Bank, as Agent, and JELD-WEN, inc., as Master
Servicer.
ARTICLE TWO
CONVEYANCE OF RECEIVABLES
Section 2.01. Conveyance of Mortgage Loan Receivables.
(a) In the case of the Initial Receivables that are Mortgage Loan
Receivables, on the Closing Date the Originator does hereby sell, transfer and
assign to the Buyer, without recourse (subject to its obligations hereunder):
(i) all right, title and interest of the Originator in
and to the Initial Receivables that are Mortgage Loan Receivables,
all Related Security with respect to such Mortgage Loan
-2-
<PAGE> 6
Receivables, all related Receivable Documents and all collections on or in
respect of such Mortgage Loan Receivables and paid thereon or in respect thereof
(including proceeds of the repurchase of Initial Receivables that are Mortgage
Loan Receivables by the Originator pursuant to Section 2.03(b)) on or after the
Initial Cutoff Date;
(ii) the interest of the Originator in the security
interests in and liens on such Mortgage Loan Receivables and any accessions
thereto granted by the Obligors pursuant to such Mortgage Loan Receivable;
(iii) the interest of the Originator in any proceeds of any
physical damage and title insurance policies covering such Mortgage Loan
Receivables and in any proceeds of any credit life or credit disability
insurance policies relating to such Mortgage Loan Receivables or the related
Obligors;
(iv) the right to realize upon any property (including the
right to receive future Liquidation Proceeds) that shall have secured any such
Mortgage Loan Receivables; and
(v) all proceeds of the foregoing.
(b) In the case of the Subsequent Receivables that are Mortgage Loan
Receivables, on the related Transfer Dates occurring from time to time prior to
the Commitment Termination Date, the Originator will transfer and assign to the
Buyer, without recourse (subject to its obligations hereunder):
(i) all right, title and interest of the Originator in
and to the related Subsequent Receivables that are Mortgage Loan Receivables,
all Related Security with respect to such Mortgage Loan Receivables, all related
Receivable Documents and all collections on or in respect of such Mortgage Loan
Receivables and paid thereon or in respect thereof (including proceeds of the
repurchase of such Subsequent Receivables that are Mortgage Loan Receivables by
the originator pursuant to Section 2.03(b)) on or after the related Subsequent
Cutoff Date;
(ii) the interest of the Originator in the security
interests in and liens on the related Mortgage Loan Receivables and any
accessions thereto granted by the Obligors pursuant to such Mortgage Loan
Receivables;
(iii) the interest of the Originator in any proceeds of any
physical damage and title insurance policies covering the related Mortgage Loan
Receivables and in any proceeds of any credit life or credit disability
insurance policies relating to such Mortgage Loan Receivables or the related
Obligors;
(iv) the right to realize upon any property (including the
right to receive future Liquidation Proceeds) that shall have secured any such
Mortgage Loan Receivables; and
-3-
<PAGE> 7
(v) all proceeds of the foregoing.
(c) In connection with each such conveyance, on or prior to the related
Transfer Date, as the case may be, the Originator agrees to record and file, at
its own expense, a financing statement with respect to the related Mortgage Loan
Receivables meeting the requirements of applicable state law in such manner and
in such jurisdictions as are necessary to perfect the sale and assignment of
such Mortgage Loan Receivables to or upon the order of the Buyer, and the
proceeds thereof as may be perfected by filing a financing statement (and any
continuation statements as are required by applicable state law), and to deliver
a file-stamped copy of each such financing statement (or continuation statement)
or other evidence of such filings (which may, for purposes of this Section ,
consist of telephone confirmation of such filing with the file stamped copy of
each such filing to be provided to the Buyer in due course), as soon as is
practicable after the Originator's receipt thereof.
In connection with each such conveyance, the Originator further agrees,
at its own expense, on or prior to the related Transfer Date, (i) to indicate in
its computer files that the related Mortgage Loan Receivables have been
transferred to the Buyer pursuant to this Agreement and (ii) to deliver to the
Buyer a computer file or microfiche list containing a true and complete list of
all such Mortgage Loan Receivables, and containing the information with respect
thereto required by the Schedule of Mortgage Loan Receivables and (iii) to
deliver to the Buyer and the Agent a Schedule of Mortgage Loan Receivables with
respect to such Mortgage Loan Receivables, which shall be added to all Schedules
of Mortgage Loan Receivables delivered to the Buyer and the Agent prior to such
Transfer Date and appears as Schedule A hereto.
(d) On each Transfer Date, the Originator shall deliver to or upon the
order of the Buyer, the documents relating to the related Mortgage Loan
Receivables called for pursuant to Section 2.05 of the Transfer Agreement. In
the case of the related Mortgages, Mortgage Notes and mortgage assignments, such
documents can be delivered to or upon the order of the Buyer in the form and
within the time periods specified by Section 2.05(b) of the Transfer Agreement.
(e) From time to time, the Originator can substitute a new Mortgage
Loan Receivable that is an Eligible Receivable for a Receivable that is either a
Defaulted Receiver or is otherwise no longer an Eligible Receivable, upon the
terms and conditions in Section 15.02 of the Transfer Agreement.
Section 2.02. Representations and Warranties as to the Originator. The
Originator hereby represents and warrants as of the date and execution of this
Agreement, the Closing Date and each Transfer Date that:
-4-
<PAGE> 8
(a) Organization and Good Standing. The Originator shall have been duly
organized under the laws of the State of Oregon and shall be validly existing as
a limited partnership whose status is active, with power and authority to own
its properties and to conduct its business as such properties shall be currently
owned and such business is presently conducted, and had at all relevant times,
and shall now have, power, authority and legal right to acquire, own, sell and
service the Mortgage Loan Receivables.
(b) Due Qualification. The Originator shall be duly qualified to do
business as a foreign limited partnership in good standing, and shall have
obtained all necessary licenses and approvals in all jurisdictions in which the
ownership or lease of property or the conduct of its business shall require such
qualifications, except where the failure to so qualify or to have obtained such
licenses and approvals would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or business
prospects of the Originator.
(c) Power and Authority. The Originator shall have the power and
authority to execute, deliver and perform its obligations under this Agreement
and each other Facility Document to which it is a party or by which it is bound
and to carry out their respective terms; the Originator shall have full power
and authority to sell and assign the Mortgage Loan Receivables to be sold and
assigned to and deposited with the Buyer and shall have duly authorized such
sale and assignment to the Buyer by all necessary corporate action; and the
execution, delivery and performance of this Agreement and each other Facility
Document to which it is a party or by which it is bound shall have been duly
authorized by the Originator by all necessary corporate action.
(d) Valid Transfer and Assignment; Binding Obligations. This Agreement
shall evidence a valid transfer and assignment of the Mortgage Loan Receivables,
enforceable against creditors of and purchasers from the Originator; and shall
constitute a legal, valid and binding obligation of the Originator enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights in general and by general principles of equity,
regardless of whether such enforceability shall be considered in a proceeding in
equity or at law.
(e) No Violation. The consummation of the transactions contemplated by
this Agreement and the other Facility Documents to which the originator is a
party or by which it is bound and the fulfillment of the terms of this Agreement
shall not conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default under,
the partnership agreement of the Originator, or conflict with or violate any of
the material terms or provisions of, or constitute (with or without notice or
lapse of time) a default under, any indenture, agreement or other instrument to
which the
-5-
<PAGE> 9
Originator is a party or by which it shall be bound; nor result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement or other instrument (other than the Lien created
by this Agreement, the Lien created by the Transfer Agreement and the Liens of
WorldMark); nor violate any law or, to the best of the Originators knowledge,
any order, rule or regulation applicable to it of any court or of any federal or
state regulatory body, administrative agency or other Governmental Authority
having jurisdiction over it or its properties; which breach, default, conflict,
lien or violation would have a material adverse effect on its condition,
financial or otherwise, or its earnings, business affairs or business prospects.
(f) No Proceedings. There are no proceedings or investigations pending,
or to the best of the Originator's knowledge, threatened, before any court,
regulatory body, administrative agency or other Governmental Authority having
jurisdiction over it or its properties: (i) asserting the invalidity of any
other Facility Document to which it is a party or by which it is bound, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
any Facility Document to which it is a party or by which it is bound, or (iii)
seeking any determination or ruling that might materially and adversely affect
the performance by the Originator of its obligations under, or the validity or
enforceability of any Facility Document to which it is a party or by which it is
bound.
(g) Government Approvals. No authorization or approval or other action
by, and no notice to or filing with, any Governmental Authority is required for
the due execution, delivery and performance by the Originator of any Facility
Document to which it is a party by which it is bound with the transactions
contemplated thereby except such as have been obtained prior to the date of this
Agreement and are in full force and effect (copies of which have been delivered
to the Buyer and the Agent).
(h) Licenses. The Originator holds, and at all times during the term of
this Agreement will hold, all material licenses, certificates, franchises and
permits from all Governmental Authorities necessary for the conduct of its
business and has received no notice of proceedings relating to the revocation of
any such license, certificate, franchise or permit, which singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
materially and adversely affect its ability to perform its obligations under any
Facility Agreement to which it is a party or by which it is bound or any other
documents or transactions contemplated hereunder or thereunder or the validity
or enforceability of the Mortgage Loan Receivables.
(i) Offices. The principal place of business and chief executive office
of Eagle Crest, is located at the address set forth in Section 5.04.
-6-
<PAGE> 10
(j) Taxes. The Originator has filed all tax returns and reports
required of it, has paid all Taxes which are due and payable and has provided
adequate reserves for payment of any Tax whose payment is being contested; all
charges, accruals and reserves on its books in respect of Taxes for all fiscal
periods to date are accurate; and there are no material questions or disputes
between the Originator and any Governmental Authority with respect to any Taxes.
(k) Compliance with Applicable Laws. The Originator is in material
compliance with the requirements of all applicable laws, rules, regulations and
orders of all Governmental Authorities.
(1) Ownership of Partnership Interests. The ownership interests in the
Originator are as follows: (i) E.C.G.P., Inc., which is owned by Trendwest,
Inc., a 100% owned subsidiary of JELD-WEN, is a general partner holding a 14.2%
partnership interest in the Originator, (ii) JELD-WEN is a limited partner
holding a 65.1% partnership interest in the Originator and (iii) Arland Keeton,
Daryl Vroman, Dee Tozier and Bill Lyche hold in the aggregate a 20.7%
partnership interest in the Originator.
The representations and warranties set forth in this Section shall
survive the transfer and assignment of the related Mortgage Loan Receivables to
the Buyer on the related Transfer Date and the transfer and assignment of such
Mortgage Loan Receivables by the Buyer to the Purchasers pursuant to the
Transfer Agreement. Each of the Originator and the Buyer shall inform the other
party promptly, in writing, upon the discovery of any breach of the foregoing
representations and warranties.
Section 2.03. Representations and Warranties as to the Mortgage Loan
Receivables: Repurchase Upon Breach.
(a) In connection with each transfer of Mortgage Loan Receivables to
the Buyer, as of the related Transfer Date, each such Mortgage Loan Receivable
satisfies each of the representations and warranties set forth in Sections 7.02
and 7.03 of the Transfer Agreement.
(b) The representations and warranties set forth in this Section shall
survive the transfer and assignment of the Mortgage Loan Receivables to the
Buyer and the transfer and assignment of such Mortgage Loan Receivables by the
Buyer to the Purchasers pursuant to the Transfer Agreement. Each of the
Originator and the Purchaser shall inform the other party promptly, in writing,
upon the discovery of any breach of the Originator's representations and
warranties pursuant to Section 2.03(a) which materially and adversely affects
any Mortgage Loan Receivable. Unless the breach shall have been cured in all
material respects by the 60th day following its discovery, the Originator will
repurchase such Mortgage Loan Receivable by remitting an amount equal to the
related Purchase Amount to or upon the order of the Buyer. Additionally, in the
event that, for whatever reason, the Seller
-7-
<PAGE> 11
fails to deliver to the Agent in respect of a Mortgage Loan Receivable either an
opinion of counsel pursuant to Section 2.05(a)(iv) of the Transfer Agreement or
a recorded assignment of mortgage with evidence of recording thereon in favor of
the Agent within 90 days after the related Transfer Agreement, the Originator
will repurchase such Mortgage Loan Receivable as described above. The sole
remedy of the Buyer with respect to a breach of the foregoing representations
and warranties which materially and adversely affects any Mortgage Loan
Receivable or failure to deliver such opinion of counsel or record such
assignment of mortgage shall be to require the Originator to repurchase the
related Mortgage Loan Receivable.
(c) In connection with the transfer of ownership of a Mortgaged
Property by the related Obligor, upon receipt of notice from the Buyer, the
Originator may, if the Master Servicer is required to enforce a due-on-sale
clause contained in the related Mortgage Note pursuant to applicable law and the
provisions of the Transfer Agreement, in its discretion, repurchase the related
Mortgage Loan Receivable by remitting an amount equal to the related Purchase
Amount to or upon the order of the Buyer.
(d) Upon the payment by the Originator of the Purchase price for any
Mortgage Loan Receivable repurchased pursuant to this Section , the Buyer shall
cause such instruments as may be necessary to assign and transfer, without
recourse or warranty of any kind, such Mortgage Loan Receivable and the Related
Security and Receivable Documents to the Originator.
Section 2.04. Affirmative Covenants of the Originator. The Originator
hereby covenants that from the date hereof until the first day following the
Commitment Termination Date on which (i) the Outstanding Principal Balance of
the Mortgage Loan Receivables comprising part of the Receivables Pool shall be
reduced to zero and (ii) all Obligations shall have been fully paid and
performed, the Originator shall do all of the following unless the Buyer or the
Agent (acting upon the direction of the Required Purchasers) shall otherwise
consent in writing:
(a) The Originator shall comply in all material respects with all
applicable laws, rules, regulations and orders, including but not limited to all
applicable laws, rules, regulations and orders with respect to the Mortgage Loan
Receivables and the Assigned Collateral relating thereto and will take all
actions necessary to ensure that all Taxes, pension obligations and other
governmental claims in respect of its operations, business and assets are
properly paid when due.
(b) The Originator shall preserve and maintain its partnership
existence, rights, franchises and privileges in the State of Oregon, and qualify
and remain qualified in good standing as a foreign partnership in each State
where such qualification is necessary or advisable in view of its operations,
business and assets.
-8-
<PAGE> 12
(c) From time to time during regular business hours and upon at least
three days' prior written notice, the Originator shall permit the Buyer, the
Agent, any Purchaser and their respective agents and representatives (i) to
examine and make copies of and abstracts from all books, records and documents
(including, without limitation, computer tapes and disks) in the possession or
under the control of the Originator and (ii) to visit the offices and properties
of the Originator for the purpose of examining such materials and to discuss
matters relating to the Mortgage Loan Receivables, the performance of the
Originator under any Facility Document to which it is a party or by which it is
bound and affairs, finances and accounts of the Originator generally with any of
its officers, directors or employees.
(d) The Originator shall comply in all material respects with the
Credit and Collection Policy in connection with the Mortgage Loan Receivables.
(e) Promptly after learning thereof, the Originator will notify the
Buyer and the Agent of (i) the details of any action, proceeding, investigation
or claim against or affecting it instituted before any court, arbitrator or
Governmental Authority or, to its knowledge threatened to be instituted, which,
if determined adversely would be likely to have a material adverse effect on (A)
the performance by it of any obligations under any Facility Document to which it
is a party or by which it is bound, (B) the validity or enforceability of any
Facility Document to which it is a party or by which it is bound, (C) the
validity or enforceability of any Mortgage Loan Receivable or the related
Mortgage Note or Mortgage or (D) the first priority interest of the Agent on
behalf of the Purchasers in the Assigned Collateral relating to the Mortgage
Loan Receivables; (ii) any material dispute between the Originator and any
Governmental Authority; (iii) any labor controversy which has resulted in or
threatens to result in a strike which would materially affect the business
operations of the Originator; and (iv) the occurrence of any Termination Event
relating to the Originator.
(f) From time to time the Originator will (i) pay or reimburse the
Buyer, the Agent and each Lender for all Taxes imposed on this Agreement and for
all expenses including legal fees incurred in connection with the enforcement by
judicial proceedings or otherwise of any of the rights of the foregoing parties
under this Agreement or under any other Facility Document to which the
Originator is a party or by which it is bound; (ii) pay or reimburse the Agent
for all expenses, including legal fees, incurred by or on behalf of the Buyer in
connection with the perfection of the Buyer's interest in the Assigned
Collateral relating to the Mortgage Loan Receivables; (iii) obtain and promptly
furnish to the Agent evidence of all such government approvals as may be
required to enable the Originator to comply with its obligations under any
Facility Document to which it is a party or by which it is bound; (iv) execute
and deliver all such instruments (including UCC continuation statements) and
perform all
-9-
<PAGE> 13
such other acts as may be necessary to maintain the Purchasers' interest
continuously perfected as a first priority interest in the Assigned Collateral
relating to the Mortgage Loan Receivables; (v) execute and deliver all such
other instruments and perform all such other acts as the Buyer, the Agent or any
Purchaser may reasonably request to carry out the transactions contemplated by
this Agreement and the other Facility Documents to which it is a party or by
which it is bound; and (f) comply in all material respects with the obligations
of the Originator under the Facility Documents.
(g) The Originator agrees to deliver in kind upon receipt to the Master
Servicer all Collections received by the Originator in respect of any Mortgage
Loan Receivable after the related Transfer Date as soon as practicable after
receipt thereof, but in any event no later than two Business Days following such
receipt.
(h) On the last Business Day of each month but in any event no later
than five days subsequent to the last Business Day of each month, the Originator
shall provide to the Buyer such information as is reasonably necessary for the
Buyer to determine the Consolidated Delinquency Date Amount, the Consolidated
Defaulted Receivable Amount and the Consolidated Monthly Charge-off Date.
Section 2.05. Negative Covenants of the Originator. From the date
hereof until the first day following the Commitment Termination Date on which
(i) the Outstanding Principal Balance of the Mortgage Loan Receivables
comprising part of the Receivables Pool shall be reduced to zero and (ii) all
Obligations shall have been fully paid and performed, the Originator shall
refrain from doing any of the following, unless the Buyer or the Agent (acting
upon the direction of the Required Purchasers) shall otherwise consent in
writing:
(a) Except for the conveyances hereunder, the Originator will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur, assume
or suffer to exist any Lien on any Mortgage Loan Receivable or any Related
Security or Receivable Document, whether now existing or hereafter created, or
any interest therein; the Originator will immediately notify the Buyer and the
Agent of the existence of any Lien on any Mortgage Loan Receivable or any
Related Security or Receivable Document and such Mortgage Loan Receivable will
be repurchased from the Buyer by the Originator in the manner and with the
effect specified in Section 2.03(b), and the Originator shall defend the right,
title and interest of the Buyer in, to and under the Mortgage Loan Receivables,
whether now existing or hereafter created, against all claims of third parties
claiming through or under the Originator; provided, however, that nothing in
this subsection shall prevent or be deemed to prohibit the Originator from
suffering to exist upon any of the Mortgage Loan Receivables or any Related
Security or Receivable Document, Liens for municipal or other local taxes if
such taxes shall not at the time be due and payable or if the Originator shall
currently be contesting the validity of such taxes in good faith by appropriate
-10-
<PAGE> 14
proceedings and shall have set aside on its books adequate reserves with respect
thereto.
(b) After the Transfer Date relating to a Mortgage Loan Receivable, the
Originator shall take no action, nor omit to take any action, which would impair
the rights of the Buyer in such Mortgage Loan Receivable.
(c) The Originator shall not, during the term of this Agreement,
transfer to the Buyer Mortgage Loan Receivables on forms substantially different
from the forms attached as Exhibits to the Transfer Agreement.
ARTICLE THREE
PAYMENT OF PURCHASE PRICE
Section 3.01. Payment of Purchase Price. In consideration of the sale
from the Originator to the Buyer, as provided in Section 2.01, of (a) the
Initial Receivables that are Mortgage Loan Receivables on the Closing Date, the
Buyer agrees to pay the Originator an amount equal to the Outstanding Principal
Balance of such Mortgage Loan Receivables as of the Initial Cutoff Date, plus
accrued interest to the date of purchase, and (b) the Subsequent Receivables
that are Mortgage Loan Receivables, on the related Transfer Dates, the Buyer
agrees to pay the Originator an amount equal to the Outstanding Principal
Balance of such Mortgage Loan Receivables as of the related Subsequent Cutoff
Date; plus accrued interest to the date of purchase.
ARTICLE FOUR
TERMINATION
Section 4.01. Termination. The respective obligations and
responsibilities of the Originator and the Buyer created hereby shall terminate,
except for indemnity obligations as provided herein, upon the termination of the
Transfer Agreement.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
Section 5.01. Amendment.
(a) This Agreement may be amended from time to time in writing by the
Buyer and the Originator, with the consent of the Agent, which consent shall not
be unreasonably withheld, to cure any ambiguity, to correct or supplement any
provisions herein which may be inconsistent with any other provisions herein, or
to add any other provisions with respect to matters or questions arising under
-11-
<PAGE> 15
this Agreement which shall not be inconsistent with the provisions of this
Agreement or the Transfer Agreement; provided, however, that such action shall
not, as evidenced by an opinion of counsel delivered to the Buyer and the Agent,
adversely affect in any material respect the interests of the Buyer or the
Purchasers in any Mortgage Loan Receivables or Assigned Collateral related
thereto.
(b) This Agreement may also be amended from time to time in writing by
the Buyer and the Originator, with the consent of the Agent (acting upon the
direction of the Required Purchasers) for the purpose of adding any provisions
to or changing in any manner or eliminating any of the provisions of this
Agreement.
Section 5.02. Protection of Right, Title and Interest to Mortgage Loan
Receivables.
(a) The Originator at its expense shall cause this Agreement, all
amendments hereto and/or all financing statements and continuation statements
and any other necessary documents covering the Buyer's right, title and interest
to the Mortgage Loan Receivables and other property conveyed by the Originator
to the Buyer hereunder to be promptly recorded, registered and filed, and to be
at all times kept recorded, registered and filed, all in such manner and in such
places as may be required by law fully to preserve and protect the right, title
and interest of the Buyer hereunder to all of the Mortgage Loan Receivables and
such other property. The Originator shall deliver to the Buyer file-stamped
copies of, or filing receipts for, any document recorded, registered or filed as
provided above, as soon as available following such recording, registration or
filing. The Buyer and the Agent shall cooperate fully with the Originator in
connection with the obligations set forth above and will execute any and all
documents reasonably required to fulfill the intent of this Section .
(b) Within 30 days after the Originator makes any change in its name,
identity or partnership structure which would make any financing statement or
continuation statement filed in accordance with paragraph (a) above seriously
misleading within the meaning of Section 9-402(7) of the UCC as in effect in the
applicable state, it shall give the Buyer and the Agent notice of any such
change and shall execute and file such financing statements or amendments as may
be necessary to continue the perfection of the Buyer's security interest in the
Mortgage Loan Receivables and the Assigned Collateral relating thereto.
(c) The Originator will give the Buyer and the Agent prompt written
notice of (i) any relocation of any office at which it keeps records concerning
the Mortgage Loan Receivables or of its principal executive office and (ii)
whether, as a result of such relocation, the applicable provisions of the UCC
would require the filing of any amendment of any previously filed financing or
continuation statement or of any new financing statement and shall
-12-
<PAGE> 16
execute and file such financing statements or amendments as may be necessary to
continue the perfection of the interest of the Buyer in the Mortgage Loan
Receivables and the Assigned Collateral relating thereto.
Section 5.03. Governing Law. This Agreement and the other facility
documents shall be governed by and construed in accordance with the internal
laws of the State of Washington, except to the extent that the perfection (and
the effect of perfection or nonperfection) of the interests of the lenders in
the receivables, loan documents, related security, assigned collateral, facility
documents and collections is governed by the laws of a jurisdiction other than
the state of Washington.
Section 5.04. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, return receipt requested,
to (a) in the case of the Buyer, to TW HOLDINGS, INC., P.O. Box 1329, 3250
Lakeport Boulevard, Klamath Falls, Oregon 97601, Attention: R.C. Wendt and Gary
A. Florence; (b) in the case of Eagle Crest, to Eagle Crest Partners, Ltd., 821
South 6th Street, Redmond, Oregon 97756, Attention: Lauri Miller; or (c) as to
either of such Persons, at such other address as shall be designated by such
Person in a written notice to the other Person.
Section 5.05. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions
or terms shall be deemed severable from the remaining covenants, agreements,
provisions or terms of this Agreement and shall in no way affect the validity or
enforceability of the other provisions of this Agreement.
Section 5.06. Assignment. This Agreement may not be assigned by the
Buyer or the Originator except as contemplated by this Section or the Transfer
Agreement; provided, however, that simultaneously with the execution and
delivery of this Agreement, the Buyer shall assign all of its right, title and
interest herein to the Agent for the benefit of the Purchasers as provided in
the Transfer Agreement, to which the Originator hereby expressly consents.
Section 5.07. Further Assurances. The Originator and the Buyer agree to
do and perform, from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the other party hereto
more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements, amendments, continuation
statements or releases relating to the Mortgage Loan Receivables for filing
under the provisions of the UCC or other law of any applicable jurisdiction.
-13-
<PAGE> 17
Section 5.08. No waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Buyer or the Originator, any
right, remedy, power or privilege hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
Section 5.09. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument.
Section 5.10. Third-Party Beneficiaries. This Agreement will inure to
the benefit of and be binding upon the parties hereto, for the benefit of the
Agent and the Purchasers, which shall be considered to be a third-party
beneficiary hereof. Except as otherwise provided in this Agreement, no other
person will have any right or obligation hereunder.
Section 5.11. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement sets forth the entire understanding of the
parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement, This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 5.12. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 5.13. Originator Indemnification. The Originator shall
indemnify and hold harmless the Buyer from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts, omissions
or alleged acts or omissions arising out of activities of the Originator
pursuant to this Agreement or as a result of the transactions contemplated
hereby, including, but not limited to, any judgment, award, settlement,
reasonable attorneys' fees and other costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim;
provided, however, that the Originator shall not indemnify the Buyer if such
acts, omissions or alleged acts or omissions constitute negligence or willful
misconduct by the Agent or any Purchaser.
Section 5.14. Assumption of the Obligations of the Originator. The
obligations of the Originator hereunder shall not be assignable nor shall any
Person succeed to the obligations of the Originator hereunder except in each
case in accordance with the provisions of Section 5.06.
-14-
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective officers as of the day and year first above
written.
EAGLE CREST PARTNERS, LTD., as Originator
By: Eagle Crest G.P., Inc.,
its General Partner
By
---------------------------------
Harold Derrah, Secretary
TW HOLDINGS, INC., as Buyer
By:
------------------------------------
R. C. Wendt, President
ACCEPTED:
SEATTLE-FIRST NATIONAL BANK,
as Agent
By:
------------------------------
-15-
<PAGE> 19
EX. - 10.19
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is
made this 13th day of March, 1992, by and between TRENDWEST RESORTS, INC.
(hereinafter referred to as "Seller") and JELD-WEN FOUNDATION (hereinafter
referred to as "Buyer"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the following terms shall
have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts
receivable of Seller which are described and listed in Exhibit A hereto, free
and clear of all liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be
executed by the Seller and Buyer at the Closing in the form of attached Exhibit
B covering transfer of the Seller's interest in the Acquired Purchase contracts.
c. "Bill of Sale" means the instrument to be executed by the Seller and
delivered to the Buyer at the Closing in the form of attached Exhibit C.
d. "Buyer" means the JELD-WEN FOUNDATION located at 3250 Lakeport
Blvd., Klamath Falls, Oregon 97601.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective Time" has the meaning specified in Section 3 hereof.
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
j. "Seller" means TRENDWEST RESORTS, INC. located at 4010 Lake
Washington Blvd., Suite 210, Kirkland, Washington 98033.
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED PURCHASE CONTRACTS. Subject to
the terms and conditions and in reliance upon the representations and warranties
contained in this Agreement, Seller shall sell to Buyer and Buyer shall acquire
from Seller the Acquired Purchase Contracts.
-1-
<PAGE> 20
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Seller's offices, located at 4010 Lake Washington Blvd., Suite 210, Kirkland,
Washington 98033 at 10:00 a.m. (local time) on March 13, 1992 (or such other
place, date and time as shall be agreed upon by Buyer and Seller). The date of
the closing is referred to in this Agreement as the "Closing Date". When
completed, the Closing shall be effective as of 12:01 a.m, (local time) on March
13, 1992 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts, Buyer
shall pay to Seller the total sum of One Million Four Hundred Thousand and
No/100ths Dollars ($1,400,000.00) (hereinafter referred to as "Purchase Price"),
payable, at closing, in immediately available funds of the United States by wire
transfer.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Buyer as follows:
5.1 Standing and Authority of Seller. Seller is a corporation duly organized
and validly existing in good standing under the laws of the State of Washington
and possesses all requisite corporate power and authority to enter into and
perform this Agreement. This Agreement is a valid and binding obligation of
Seller, duly enforceable in accordance with its terms.
5.2 Title and Condition of Acquired Assets. Seller has good, marketable and
indefeasible title to all of the Acquired Purchase Contracts at the Closing and
as of the Effective Time, free and clear of all mortgages, liens, charges,
claims, leases, restrictions and encumbrances whatsoever. There is no agreement
of any kind whereby any Person or Persons have any right to acquire or obtain
(by purchase, gift, merger, consolidation or otherwise) an interest in any of
the Acquired Purchase Contracts.
5.3 Compliance with Instruments. Seller is not in default under, or in breach
of any material term or provision of contract, lease, agreement or other
instrument to which the Acquired Purchase Contracts are bound. The execution,
delivery and performance of this Agreement by Seller does not and will not
conflict with or result in a breach of or a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, any of the
terms, conditions or provisions of any (as so defined) indenture, contract,
agreement, license, lease or other instrument to which the Acquired Purchase
Contracts are bound.
5.4 Authorization by Seller. The execution, delivery and performance of this
Agreement by Seller have been duly and validly authorized by all necessary
action on the part of Seller and this Agreement is a valid, binding and
enforceable obligation of Seller
-2-
<PAGE> 21
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting or limiting the
rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Seller or under the authority
of Seller is or will be entitled to any broker's, finder's or similar fee,
directly or indirectly from the Buyer in connection with the asset purchase
contemplated in this Agreement.
5.6 Disclosure. To Seller's knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of the Seller to
transfer, assign, and deliver the Acquired Purchase Contracts to Buyer pursuant
to this Agreement is subject to the satisfaction (unless waived in writing by
Seller) of each of the following conditions at and as of the Closing.
6.1 Performance of Obligations by Buyer. Buyer shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Buyer under this Agreement prior to or at the Closing.
6.2 Purchase Price. Seller shall have received, the Purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. Buyer shall have obtained or effected all consents,
approvals, waivers, notices and filings required in connection with the
execution and delivery by Buyer of this Agreement or consummation by Buyer of
the transactions contemplated thereby, and any notice or waiting period relating
thereto shall have expired with all requirements lawfully imposed having been
satisfied in all material respects.
6.4 Escrow Service Agreement. Buyer, Seller, and the escrow agent shall sign
and deliver the Service Escrow Agreement in the form attached hereto as Exhibit
D.
7. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to
purchase the Acquired Purchase Contracts from Seller pursuant hereto is subject
to the satisfaction (unless waived in writing by Buyer) of each of the following
conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Seller contained in Section 5 hereof shall be true and correct in
all material respects on and as of the date of this Agreement and at and as of
the Closing as though made at and as of the Closing, except as affected by the
transactions contemplated by this Agreement.
-3-
<PAGE> 22
7.2 Performance of Obligations by Seller. Seller shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Seller under this Agreement prior to or at the Closing including without
limitation the delivery to Buyer of: (a) a duly executed Bill of Sale
transferring to Buyer all of the Acquired Purchase Contracts free of all liens
and encumbrances; (b) a duly executed Assignment and Assumption Agreement
transferring the Acquired Purchase Contracts; (c) a certified copy of
resolutions of the Board of Directors of Seller authorizing it to enter into and
perform this Agreement.
7.3 Consents and Notices. Seller shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Seller of this Agreement or consummation by Seller
of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7.4 Escrow Agreement. Buyer, Seller, and the escrow agent shall sign and
deliver the Service Escrow Agreement in the form attached hereto as Exhibit D.
8. FURTHER COOPERATION. After the Closing, each party, at the request of the
other and without additional consideration, shall execute and deliver or cause
to be executed and delivered from time to time such further instruments and
shall take such further action as the requesting party may reasonably require in
order to carry out more effectively the intent and purpose of this Agreement.
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be waived
without affecting any of the rights, conditions, or limitations relating to the
other terms and conditions of this Agreement at any time by an instrument in
writing signed by the party which is entitled to the benefits thereof and this
Agreement may be amended or supplemented at any time by an instrument in writing
signed by all parties hereto.
10. EXPENSES. Each party will be responsible for its own attorneys', accounting
and other professional fees incurred in connection with the purchase
contemplated in this Agreement.
11. PRORATIONS. The parties will prorate as of the Effective Time, all interest
and principle receivable and periodic charges which relate to the Acquired
Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and inure
to the benefit of and be enforceable by each of the parties hereto and their
respective successors and assigns. Neither this Agreement nor any obligation
hereunder shall be assigned or assignable by Buyer or Seller without the prior
written consent of the other parties hereto.
-4-
<PAGE> 23
13. NOTICES. All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served if in writing or delivered personally or sent
by certified or registered mail, postage prepaid, addressed as follows:
To Seller: TRENDWEST RESORTS, INC.
4010 Lake Washington, Blvd,, Suite 210
Kirkland, Washington 98033
To Buyer: JELD-WEN FOUNDATION
3250 Lakeport Blvd.
Klamath Falls, Oregon 97601
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto with respect to the transactions contemplated hereby and
supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
17. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
-5-
<PAGE> 24
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
BUYER: SELLER:
JELD-WEN FOUNDATION TRENDWEST RESORTS, INC.
By: By:
------------------------------- -------------------------------
R. C. Wendt, Trustee Its:
-------------------------------
-6-
<PAGE> 1
EXHIBIT 10.14
TW HOLDINGS, INC.
as Seller
SEATTLE-FIRST NATIONAL BANK,
as Purchaser,
SEATTLE-FIRST NATIONAL BANK,
as Agent, and
JELD-WEN, INC.,
as Master Servicer
$20,000,000
RECEIVABLES TRANSFER AGREEMENT
Dated as of December 1, 1993
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE ONE
DEFINITIONS
<S> <C>
Section 1.01. Certain Defined Terms........................................................... -2-
Section 1.02. Usage of Terms.................................................................. -21-
Section 1.03. Accounting Term................................................................. -21-
ARTICLE TWO
THE COMMITMENT; TRANSFER OF RECEIVABLES
Section 2.01. The Commitment.................................................................. -21-
Section 2.02. Certain Purchase Procedures..................................................... -21-
Section 2.03. Extension of Commitment Termination Date........................................ -22-
Section 2.04. Conveyance of Receivables....................................................... -23-
Section 2.05. Custody of Receivable Files..................................................... -25-
Section 2.06. Duties of Master Servicer as Custodian.......................................... -26-
Section 2.07. Instructions; Authority to Act.................................................. -27-
Section 2.08. Indemnification by Master Servicer as
Custodian ................................................................... -27-
Section 2.09. Effective Period and Termination................................................ -28-
ARTICLE THREE
EARNED YIELD
Section 3.01. Earned Yield.................................................................... -28-
Section 3.02. Selection of Yield.............................................................. -28-
Section 3.03. Applicable Days For Computation of Yield........................................ -29-
Section 3.04. Unavailable LIBOR Rate.......................................................... -29-
Section 3.05. Yield Protection................................................................ -29-
Section 3.06. Funding Losses.................................................................. -31-
ARTICLE FOUR
COLLECTIONS AND SETTLEMENTS
Section 4.01. Collections..................................................................... -32-
Section 4.02. Reinvestments................................................................... -32-
Section 4.03. Settlement Procedures........................................................... -32-
Section 4.04. Deposits to Collection Account to Avoid
Break-Funding Costs ......................................................... -33-
Section 4.05. Deemed Collections.............................................................. -34-
Section 4.06. Allocation of Payments and Collections.......................................... -34-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 4.07. Order of Distribution by the Agent.............................................. -35-
Section 4.08. Collection Account.............................................................. -35-
Section 4.09. Lock Boxes...................................................................... -36-
ARTICLE FIVE
FEES AND OTHER PAYMENTS
Section 5.01. Fees............................................................................ -37-
Section 5.02. Termination Event Rate Payments................................................. -37-
Section 5.03. Payments........................................................................ -37-
ARTICLE SIX
CONDITIONS OF PURCHASES
Section 6.01. Conditions to Initial Purchase.................................................. -38-
Section 6.02. Conditions to All Purchases..................................................... -40-
ARTICLE SEVEN
REPRESENTATIONS AND WARRANTIES
Section 7.01. Representations and Warranties as to
the Seller .................................................................. -41-
Section 7.02. Representations and Warranties as to
the Receivables ............................................................. -44-
Section 7.03. Additional Representations and Warranties
as to the Mortgage Loan Receivables ......................................... -46-
Section 7.04. Repurchase Upon Breach; Optional Repurchase..................................... -50-
Section 7.05. Representations and Warranties as a Whole....................................... -51-
ARTICLE EIGHT
AFFIRMATIVE COVENANTS
Section 8.01. Affirmative Covenants of the Seller............................................. -51-
Section 8.02. Affirmative Covenants of JELD-WEN............................................... -54-
ARTICLE NINE
NEGATIVE COVENANTS
Section 9.01. Negative Covenants of the Seller................................................ -55-
Section 9.02. Negative Covenants of JELD-WEN.................................................. -56-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
ARTICLE TEN
SERVICING, ADMINISTRATION AND COLLECTIONS
<S> <C>
Section 10.01. Designation of Master Servicer................................................. -57-
Section 10.02. Duties of the Master Servicer;
Subservicers ................................................................ -59-
Section 10.03. Collection Responsibilities; Receivable
Modifications ............................................................... -61-
Section 10.04. Maintenance of Insurance....................................................... -62-
Section 10.05. Assumption and Substitution Agreements......................................... -63-
Section 10.06. Realization upon Defaulted Receivables......................................... -64-
Section 10.07. Payment of Fees and Expenses of Agent;
No Offset ................................................................... -64-
Section 10.08. Servicing Fee.................................................................. -64-
Section 10.09. Representations and Warranties as to
the Master Servicer ......................................................... -65-
Section 10.10. Existence; Status as Master Servicer;
Merger ...................................................................... -66-
Section 10.11. Performance of obligations..................................................... -67-
Section 10.12. Liability of the Master Servicer;
Indemnities ................................................................. -67-
ARTICLE ELEVEN
TERMINATION EVENTS
Section 11.01. Termination Events............................................................. -68-
Section 11.02. Remedies....................................................................... -70-
ARTICLE TWELVE
THE AGENT
Section 12.01. Authorization and Action....................................................... -70-
Section 12.02. Duties and Obligations......................................................... -71-
Section 12.03. Dealings With the Seller....................................................... -72-
Section 12.04. Purchaser Credit Decision...................................................... -72-
Section 12.05. Right to Rely on Payments...................................................... -73-
Section 12.06. Limitations on Liability; Indemnification...................................... -73-
Section 12.07. Successor Agent................................................................ -74-
Section 12.08. Delegation of Duties........................................................... -75-
Section 12.09. Merger of Agent................................................................ -75-
ARTICLE THIRTEEN
ASSIGNMENTS AND PARTICIPATIONS
Section 13.01. Generally...................................................................... -75-
Section 13.02. Assignments.................................................................... -75-
Section 13.03. Participations................................................................. -76-
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE FOURTEEN
SELLER INDEMNITIES
<S> <C>
Section 14.01. Indemnities by the Seller...................................................... -77-
ARTICLE FIFTEEN
MISCELLANEOUS
Section 15.01. Repurchases for Administrative
Convenience ................................................................. -79-
Section 15.02. Substitution of Receivables.................................................... -79-
Section 15.03. No Waiver; Remedies Cumulative................................................. -80-
Section 15.04. Governing Law.................................................................. -80-
Section 15.05. Notices........................................................................ -80-
Section 15.06. Severability................................................................... -81-
Section 15.07. Entire Agreement; Amendment.................................................... -81-
Section 15.08. Submission to Jurisdiction; Etc................................................ -81-
Section 15.09. Waiver of Jury Trial........................................................... -82-
Section 15.10. Captions and Cross-References;
Incorporation by Reference .................................................. -82-
Section 15.11. Counterparts................................................................... -82-
Section 15.12. Confidentiality................................................................ -82-
Section 15.13. Oral Agreements Not Enforceable................................................ -83-
SCHEDULES
Schedule 1 - Credit and Collection Policy
(Right to Use Receivables) .................................................. S1-1
Schedule 2 - Credit and Collection Policy (Mortgage
Loan Receivables) ........................................................... S2-1
Schedule 3 - Schedule of Right to Use Receivables.............................................. S3-1
Schedule 4 - Schedule of Mortgage Loan Receivables............................................. S4-1
Schedule 5 - Location of Receivable Files...................................................... S5-1
EXHIBITS
Exhibit A Form of Purchase Notice ....................................................... A-1
Exhibit B Form of Purchase Certificate .................................................. B-1
Exhibit C Forms of Right to Use Receivables ............................................. C-1
Exhibit D Form of Mortgages and Mortgage Notes .......................................... D-1
Exhibit E Form of Settlement Statement .................................................. E-1
Exhibit F Form of Lock Box Notice ....................................................... F-1
Exhibit G Forms of Opinions of Counsel to the Seller .................................... G-1
Exhibit H Forms of Opinions of Counsel to TRI ........................................... H-1
Exhibit I Form of Opinion of Counsel to Eagle Crest ..................................... I-1
Exhibit J Forms of Opinions of Counsel to JELD-WEN ...................................... J-1
</TABLE>
-iv-
<PAGE> 6
RECEIVABLES TRANSFER AGREEMENT
This Receivables Transfer Agreement is made as of December 1, 1993,
among TW HOLDINGS, INC., a Nevada corporation (the "Seller"), Seattle-First
National Bank, a national banking association, and all other Purchasers
hereunder (collectively, the "Purchasers"), Seattle-First National Bank, a
national banking association, as agent for the Purchasers (in such capacity, the
"Agent"), and JELD-WEN, inc., an Oregon corporation ("JELD-WEN" or, in its
capacity as Master Servicer, the "Master Servicer").
RECITALS
WHEREAS, the Seller is in the business of purchasing from time to time
certain right to use timeshare receivables (the "Right to Use Receivables") from
Trendwest Resorts, Inc. ("TRI") and mortgage loan timeshare receivables (the
"Mortgage Loan Receivables" and, together with the Right to Use Receivables, the
"Receivables") from Eagle Crest Partners, Ltd. ("Eagle Crest" and, together with
TRI, the "Originators");
WHEREAS, the Seller has requested that the Purchasers provide financing
to enable the Seller to purchase Right to Use Receivables from TRI and Mortgage
Loan Receivables from Eagle Crest, and the Purchasers are willing to make funds
available for such purpose upon the terms and subject to the conditions
contained herein;
WHEREAS, as a result of the foregoing, the Seller has and will have
certain Receivables in which it intends to sell interests (the "Undivided
Interests"), which Undivided Interests shall be purchased by the Purchasers from
time to time upon the terms and subject to the conditions contained herein;
WHEREAS, certain of the collections relating to the Receivables and the
Undivided Interests may be reinvested in additional Receivables upon the terms
and subject to the conditions contained herein;
WHEREAS, the Seller has agreed to secure its obligations hereunder to
the Purchasers in connection with such sale by granting to the Agent (for the
benefit of the Purchasers) a first priority, perfected security interest in all
of the Receivables owned by it; and
WHEREAS, the Master Servicer has agreed to undertake certain
responsibilities relating to the servicing of the Receivables.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
<PAGE> 7
ARTICLE ONE
DEFINITIONS
Section 1.01. Certain Defined Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
"Agent" means Seafirst, in its capacity as agent for the Purchasers
pursuant to this Agreement, and any successor agent appointed pursuant to
Section 12.07.
"Aggregate Net Investment" means, as of any date, the aggregate amount
of all Purchasers' Investments outstanding as of such date.
"Aggregate Net Investment Limit" means, as of any date, an amount equal
to the lesser of (i) the Commitment Amount or (ii) the sum of (a) 80% of the Net
Pool Balance and (b) amounts deposited in the Collection Account pursuant to
Section 4.04 and not yet disbursed to the Agent pursuant to Section 4.09.
"Aggregate Undivided Interest" means, as of any date, an undivided
floating fractional ownership interest (owned ratably by the Purchasers) in the
Receivables comprising the Receivables Pool, which shall be equal to a fraction,
the numerator of which is the sum of (i) Aggregate Net Investment and (ii) 25%
of the Aggregate Net Investment and the denominator of which is the Net Pool
Balance and which can, in no event, exceed 100%.
"Agreement" means this Agreement and all amendments hereof and
supplements hereto as shall exist from time to time.
"Assigned Collateral" means, as of any date, the Seller's (i) ownership
interest in (a) all of the Receivables comprising the Receivables Pool; (b) all
Related Security with respect to such Receivables; (c) all collections on or in
respect of such Receivables after the related Cutoff Dates; (d) all related
Receivable Documents; and (e) all proceeds of the foregoing, and (ii) interest
in (a) the Facility Documents and (b) all monies from time to time on deposit in
the Collection Account.
"Assignee Purchaser" shall have the meaning set forth in Section 13.02.
"Assignment" means an assignment of mortgage, notice of transfer or
equivalent instrument, in recordable form, which is sufficient under the laws of
the jurisdiction in which a Mortgaged Property is located to reflect of record
the sale of the related Mortgage Note and Mortgage, which assignment, notice of
transfer or equivalent instrument may be in the form of one or more blanket
assignments covering Mortgages and Mortgage Notes secured by
-2-
<PAGE> 8
Mortgaged Properties located in the same county, if permitted by applicable law
and acceptable for recording.
"Association" means the Eagle Crest Vacation Resort Owners Association,
the Eagle Crest Master Association, the Eagle Crest Estate Homesite Association,
the River View Vista Estates Association and the Fairway Vista Estates
Association.
"Board of Governors" means the Board of Governors of the Federal
Reserve System, and any successor thereto.
"Business Day" means any day other than Saturday, Sunday or another day
on which banks are authorized or obligated to close in Seattle, Washington,
except that in connection with the selection of the LIBOR Rate or the
calculation of the LIBOR Rate for any Yield Period, "Business Day" means any day
other than Saturday or Sunday on which dealings in foreign currencies and
exchanges between banks may be carried on in London, England, New York, New York
and Seattle, Washington.
"Charge-off Rate" means, as of any Settlement Date, the average Monthly
Charge-off Rate for the three Collection Periods immediately preceding the
Collection Period in which such Settlement Date occurs.
"Closing Date" means December 30, 1993.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Percentage" means, as of any date, a fraction, expressed as
a percentage, the numerator of which is the Net Pool Balance and the denominator
is the Aggregate Net Investment.
"Collected Interest" means all Collections other than Collected
Principal and Miscellaneous Payments.
"Collected Principal" means that portion of Collections allocable to
principal on the Receivables.
"Collection Account" means the account or accounts designated as such
and established and maintained pursuant to Section 4.08.
"Collection Period" means, in the case of (i) the first Settlement
Date, the period of time from the Closing Date to and including the last day of
the month immediately preceding the month in which such Settlement Date occurs
and (ii) any Settlement Date other than the first Settlement Date, the month
immediately preceding the month in which such Settlement Date occurs.
"Collections" means all funds which either (i) are received by the
Seller or the Master Servicer on or after the related Cutoff Date on or in
respect of the Receivables and the other Assigned Collateral or (ii) are deemed
to have been received as Collections pursuant to Section 4.05.
-3-
<PAGE> 9
"Commitment" means the several obligations of the Purchasers to make
Purchases pursuant to this Agreement.
"Commitment Amount" means $20,000,000.
"Commitment Fee" means the fee payable in arrears by the Seller to the
Agent pursuant to Section 5.01 in respect of each day from the Closing Date
until the Commitment Termination Date in an amount equal to the product of (i)
0.25%, (ii) the excess, if any, of (a) the Commitment Amount on such day over
(b) the Aggregate Net Investment on such day and (iii) 1/360. Notwithstanding
the foregoing, if a Facility Increase Event has not occurred on or prior to
March 31, 1994, the Commitment Fee in respect of each day after March 31, 1994
will be calculated using 0.375% in clause (i).
"Commitment Termination Date" means February 1, 1995, as such date may
be extended pursuant to Section 2.03.
"Composer" means Composer Corporation, an Oregon corporation, and any
successor thereto.
"Consolidated Defaulted Receivable Amount" means, as of any Settlement
Date, a fraction, expressed as a percentage, the numerator of which is equal to
the sum of (i) the Outstanding Principal Balance of all Receivables included in
the Receivables Pool that were Defaulted Receivables and (ii) the outstanding
principal balance of all Originator Receivables that would be Defaulted
Receivables pursuant to the definition thereof, in each case as of the last day
of the related Collection Period, and the denominator of which is equal to the
sum of (i) the Outstanding Principal Balance of all Receivables included in the
Receivables Pool and (ii) the outstanding principal balance of all Originator
Receivables, in each case as of the last day of such Collection Period.
"Consolidated Delinquency Rate Amount" means, as of any Settlement
Date, a fraction, expressed as a percentage, the numerator of which is equal to
the sum of (i) the Outstanding Principal Balance of all Receivables included in
the Receivables Pool in respect of which a payment of Monthly P&I was more than
30 days past due and (ii) the outstanding principal balance of all Originator
Receivables in respect of which a scheduled monthly payment was more than 30
days past due, in each case as of the last day of the related Collection Period,
and the denominator of which is equal to the sum of (i) the Outstanding
Principal Balance of all Receivables included in the Receivables Pool and (ii)
the outstanding principal balance of all Originator Receivables, in each case as
of the 1st day of such Collection Period.
"Consolidated Monthly Charge-off Rate" means, in respect of any
Collection Period, a fraction, expressed as a percentage on a per annum basis,
the numerator of which is the sum of (i) the Outstanding Principal Balances of
all Receivables included in the Receivables Pool that were charged-off and (ii)
the outstanding
-4-
<PAGE> 10
principal balances of all originator Receivables that were charged-off, in each
case during such Collection Period, and the denominator of which is the sum of
(i) the average Outstanding Principal Balances of all Receivables included in
the Receivables Pool and (ii) the average outstanding principal balances of all
Originator Receivables, in each case for each day in such Collection Period.
"Credit and Collection Policy" means those credit and collection
policies described on Schedules 1 and 2 hereto, as the same may be modified from
time to time in accordance with this Agreement.
"Cutoff Date" means, with respect to a Receivable, the Initial Cutoff
Date or the related Subsequent Cutoff Date, as the case may be.
"Defaulted Receivable" means any Receivable comprising part of the
Receivables Pool (i) in respect of which the related Obligor has failed to pay
when due any amounts due in respect thereof which failure continues for 90 days
or more; (ii) in respect of which the Obligor has failed to perform any term or
covenant on its part to be performed under any related Receivable Document which
failure continues for 90 days or more, if the effect of such failure is to
accelerate or to permit (with or without the giving of notice) the acceleration
of the maturity of such Receivable or, if such Receivable is a Mortgage Loan
Receivable, the related Mortgage Note; (iii) in respect of which the related
Obligor is the subject of a petition in bankruptcy, either voluntary or
involuntary, or in any other proceeding under the federal bankruptcy laws or
makes an assignment for the benefit of creditors; (iv) in respect of which
liquidation or foreclosure proceedings relating to all or any part of the
Related Security have begun; or (v) in respect of which the Master Servicer has
determined, in accordance with the procedures and standards set forth in this
Agreement and in the related Credit and Collection Policy, that eventual payment
in full is unlikely.
"Defaulted Receivable Amount" means, as of any Settlement Date, a
fraction, expressed as a percentage, the numerator of which is equal to the
Outstanding Principal Balance of all Receivables included in the Receivables
Pool that were Defaulted Receivables as of the last day of the related
Collection Period and the denominator of which is equal to the Outstanding
Principal Balance of all Receivables included in the Receivables Pool as of the
last day of such Collection Period.
"Defective Receivable" means any Receivable required to be repurchased
by the Seller pursuant to Section 7.04.
"Delinquency Rate Amount" means, as of any Settlement Date, a fraction,
expressed as a percentage, the numerator of which is equal to the Outstanding
Principal Balance of all Receivables included in the Receivables Pool in respect
of which a payment of Monthly P&I was more than 30 days past due as of the last
day of
-5-
<PAGE> 11
the related Collection Period and the denominator of which is equal to the
Outstanding Principal Balance of all Receivables (other than Defaulted
Receivables) included in the Receivables Pool as of the last day of such
Collection Period.
"Dollar" or "$" means the currency of the United States.
"Due Date" means, with respect to any Receivable, the date upon which
installments of Monthly P&I are required to be paid pursuant to such Receivable
or, if such Receivable is a Mortgage Loan Receivable, pursuant to the related
Mortgage Note, in each case after giving effect to any grace period permitted by
such Receivable or Mortgage Note.
"Eagle Crest" means Eagle Crest Partners, Ltd., an Oregon limited
partnership, and any successor thereto.
"Eagle Crest Master Association" means a non-profit corporation
organized under the laws of the State of Oregon having its principal place of
business at 821 South Sixth Street, Redmond, Oregon 97756, which corporation
owns and operates the common improvements and facilities for the benefit of all
owners of the Mortgaged Properties.
"Eagle Crest Purchase Agreement" means the Receivables Purchase
Agreement, dated as of the date hereof, between Eagle Crest and the Seller, and
all amendments thereof and supplements thereto as shall exist from time to time.
"Eagle Crest Vacation Resort Owners Association" means a non-profit
corporation organized under the laws of the State of Oregon having its principal
place of business at 821 South Sixth Street, Redmond, Oregon 97756, which
corporation owns and operates the facilities identified for the use and benefit
of the owners of the Timeshare Estates.
"Eagle Crest Subordinated Note" means the subordinated non-recourse
promissory note of the Seller to Eagle Crest, dated the Closing Date, and all
amendments thereof and supplements thereto as shall exist from time to time.
"Earned Yield" shall have the meaning set forth in Section 3.01.
"Eligible Assignee" means a commercial bank or other financial
institution formed under the laws of any OECD Country.
"Eligible Receivable" means, as of any date, a Receivable that is
either a Right to Use Receivable or a Mortgage Loan Receivable and:
(i) as to which no portion of any payment of Monthly P&I is more
than 30 days delinquent and no portion of any
-6-
<PAGE> 12
payment of Monthly P&I has ever been more than 30 days delinquent;
(ii) is not a Defaulted Receivable;
(iii) in respect of which at the time when such Receivable became
an Eligible Receivable, four months had elapsed since the related
Origination Date;
(iv) which either constitutes chattel paper under the Nevada UCC
or, if such Receivable is a Mortgage Loan Receivable, the related
Mortgage Note constitutes an instrument under the UCC in effect in the
state in which the related Mortgaged Property is located;
(v) as to which, at the time of (a) its conveyance to the
Seller and (b) as of such date, the related originator or the Seller,
as the case may be, has or will have good and marketable title thereto
free and clear of all Liens other than (1) the Lien in favor of the
Agent for the benefit of the Purchasers created pursuant to this
Agreement, (2) if such Receivable is a Mortgage Loan Receivable, other
than Permitted Encumbrances on the related Mortgaged Property and (3)
if such Receivable is a Right to Use Receivable, other than Liens of
Worldmark;
(vi) as to which a first priority security interest in favor of
the Agent for the benefit of the Purchasers has been perfected (and, if
such Receivable is a Mortgage Loan Receivable, a first priority
security interest in the related Mortgage and Mortgage Note has been so
perfected) and
(vii) as to which no Lien exists that is on a parity with the
security interests described in clause (vi) above other than Permitted
Encumbrances on the related Mortgaged Property in the case of a
Mortgage Loan Receivable and Liens in favor of WorldMark in the case of
a Right to Use Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Eurodollar Rate" means, with respect to any Yield Period, (i) the
British Bankers' Association interest settlement rate at 11:00 a.m., London
time, on the day that is two Business Days prior to the first date of such Yield
Period, as reported on page 3750 of Telerate Systems, Inc. (or its successor
publication) (or such other page as may replace page 3750 in that service for
the purpose of displaying London interbank offer rates of major banks) under the
U.S. Dollar column, (ii) or the offered rate for U.S. Dollar deposits as
reported on the Reuters Monitor Money Rates Service and (iii) if no such rate is
available as described in clauses (i) or (ii) , the arithmetic mean of the
quotations of the rates at which deposits in U.S. Dollars are offered in the
London interbank market by three Reference Banks selected by the Agent and to
which a
-7-
<PAGE> 13
request was made to the principal London office for a quotation of such rate at
approximately 11:00 a.m., London time, on the day that is two Business Days
prior to the first date of such Yield Period to prime banks in the London
interbank market for such Yield Period.
"Eurodollar Reserves" means a fraction (expressed as a four digit
decimal), the numerator of which is the number one and the denominator of which
is the number one minus the aggregate of the minimum reserve percentages
(including, without limitation, any special, supplemental, marginal or emergency
reserves), expressed as a four digit decimal, established by the Board of
Governors or any other banking authority to which the Purchasers are subject for
Eurocurrency Liability (as such term is defined in Regulation D). For all
purposes of this Agreement, Eurodollar Reserves shall be adjusted automatically
on and as of the effective date of any change in any reserve percentage and
shall apply to all Yield Periods commencing after the effective date of such
change.
"Facility Documents" means this Agreement, the Purchase Agreements,
each Subservicing Agreement, if any, and all reports, statements, financing
statements, instruments and other documents delivered in connection herewith or
therewith or in connection with the transactions contemplated hereby or thereby.
"Facility Increase Date" means the date on which a Facility Increase
Event occurs.
"Facility Increase Event" means an increase in the Commitment Amount up
to at least $50,000,000 due to the addition of one or more new Purchasers.
"Fairway Vista Estates Association" means a non-profit corporation
organized under the laws of the State of Oregon having its principal place of
business at 821 South Sixth Street, Redmond, Oregon 97756, which corporation
owns and operates the facilities identified for the use and benefit of certain
owners of the Fractional Ownership Interests.
"Federal Funds Rate" means, with respect to any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates displayed on such days as the federal funds effective rate
on the display page designed as "Page 120" on the Dow Jones Telerate Service (or
such other page as may replace that page on that service, or such other service
as may be designated as the information source by Agent for the purpose of
determining the daily effective federal funds rate for federal funds
transactions between members of the Federal Reserve System).
"Fee Letter" means that certain letter, dated the Closing Date, from
the Agent to the Seller, and all amendments thereof and supplements thereto as
shall exist from time to time.
-8-
<PAGE> 14
"Filing Assets" means, with respect to any Receivable acquired by the
Seller after the Closing Date, (i) such Receivable; (ii) all Related Security
with respect to such Receivable; (iii) all Collections with respect to such
Receivable; (iv) all related Receivable Documents; (v) the Seller's rights under
the related Purchase Agreement; and (vi) all proceeds of the foregoing.
"FIRREA" means the Financial Institution Reform, Recovery, and
Enforcement Act of 1989, as amended.
"Fractional Ownership Interest" means a fee simple ownership interest
in common with other owners in a single-family residential home or townhouse
entitling the owner thereof to the exclusive use of such home or townhouse for
five or ten weeks, together with access to the accompanying facilities of the
Project.
"Governmental Authority" means the government of the United States or
any state, county or municipality or any foreign country or any political
subdivision of any of the foregoing or any branch, department, agency,
instrumentality, court, tribunal or regulatory authority which constitutes a
part or exercises any sovereign power of any of the foregoing.
"I&I Holdings" means I&I HOLDINGS, LTD., a Nevada corporation and a
wholly owned subsidiary of JELD-WEN, and any successor thereto.
"Indebtedness" means, with respect to the Seller, all (i) obligations
for borrowed money (other than the Subordinated Notes); (ii) obligations
representing the deferred purchase price of property other than accounts
receivable or accounts payable arising in the ordinary course of the business of
the Seller on terms customary in the trade; (iii) obligations, whether or not
assumed, secured by Liens or payable out of the proceeds or production from
property now or hereafter owned or acquired by the Seller; (iv) obligations
which are evidenced by notes, acceptances or other instruments; (v) obligations
under leases which would be capitalized on the balance sheet of the Seller
prepared in accordance with generally accepted accounting principles; and (vi)
obligations for which the Seller is obligated pursuant to a guarantee.
"Indemnified Amounts" shall have the meaning specified in Section
14.01.
"Indemnified Parties" shall have the meaning specified in Section
14.01.
"Independent Director" means a director of the Seller who is not (i) a
director, officer or employee of any affiliate of the Seller; (ii) an individual
related to any officer or director of any affiliate of the Seller; (iii) a
holder (directly or indirectly) of any voting securities of any affiliate of the
Seller; or (iv) an individual related to a holder (directly or
-9-
<PAGE> 15
indirectly) of any voting securities of any affiliate of the Seller.
"Initial Cutoff Date" means December 22, 1993.
"Initial Receivables" means the Receivables comprising the Receivables
Pool as of the Closing Date.
"Interest Rate Cap Date" means the second consecutive Settlement Date
in respect of which the difference between (i) the weighted average Receivable
Interest Rate of the Receivables comprising the Receivables Pool during the
related Collection Period and (ii) 30-day LIBOR, is less than or equal to 8%.
"Interest Rate Protection" means a transaction governed by an ISDA
Master Agreement pursuant to which a counterparty will ensure for a three year
period commencing on the related Interest Rate Cap Date, on an amount at least
equal to 60% of the Aggregate Net Investment as of such Interest Rate Cap Date,
the 30-day Eurodollar Rate will be less than or equal to the sum of (i) the
30-day Eurodollar Rate in effect on such Interest Rate Cap Date and (ii) 4%.
"Investment Company Act" means the Investment Company Act of 1940, as
amended.
"IRS" means the Internal Revenue Service, and any successor thereto.
"JELD-WEN" means JELD-WEN, inc., an Oregon corporation, and any
successor thereto.
"JELD-WEN Agreement means that certain credit agreement dated as of
June 11, 1992 among JELD-WEN, The Bank of Tokyo, Ltd., acting through its
Seattle branch, Seattle-First National Bank and the other banks listed on
Schedule 1 thereto, as lenders, and Seattle-First National Bank, as agent for
the lenders, and all amendments thereof and supplements thereto as shall exist
from time to time.
"LIBOR Rate" means, with respect to any Tranche for any Yield Period,
an interest rate per annum equal to the sum of (i) the Margin and (ii) the
product of (a) the Eurodollar Rate in effect for such Yield Period and (b) the
Eurodollar Reserves in effect on the first day of such Yield Period. For all
purposes of this Agreement, each Tranche accruing a yield at the LIBOR Rate
shall be deemed to constitute a Eurocurrency Liability and to be subject to the
reserve requirements of Regulation D, without benefit of credit or proration,
exemptions or offsets which might otherwise be available to the Purchasers from
time to time under Regulation D.
"Lien" means, with respect to any Person, any security interest, lien,
charge, claim, pledge, equity or encumbrance of any kind upon or affecting the
revenues of such Person or any real or personal property in which such Person
has or hereafter acquires
-10-
<PAGE> 16
any interest, other than Tax liens, mechanics' liens and any liens that attach
by operation of law.
"Liquidation Expenses" means, with respect to the liquidation of any
Defaulted Receivable, all reasonable out-of-pocket expenses (including all
reasonable sales and marketing expenses, but not including overhead) incurred by
the Master Servicer in connection with such liquidation.
"Liquidation Proceeds" means, with respect to the liquidation of any
Defaulted Receivable, amounts actually received in connection with such
liquidation.
"Loan Notice" shall have the meaning set forth in Section 2.03(a).
"Lock Box" means each post office box or bank box to be included in the
Lock Box Network as to which the Seller has notified the Agent that Collections
will be remitted to pursuant to Section 4.09 following a Termination Event.
"Lock Box Account" means each account maintained by the Seller as a
part of the Lock Box Network and (i) as to which the Seller has notified the
Agent that Collections will be deposited therein and (ii) with respect of which
the Agent shall have received an undated executed copy of a Lock Box Notice
addressed to the related Lock Box Bank.
"Lock Box Agreement" means each agreement between the Seller and a Lock
Box Bank relating to a Lock Box and a Lock Box Account, which agreement shall be
in form and substance satisfactory to the Agent.
"Lock Box Bank" means each of the banks or depository institutions
added as a lock box bank pursuant to Section 4.09.
"Lock Box Network" means one or more post office boxes and/or bank
boxes and accounts maintained BY the Seller for the sole purpose of receiving
Collections and in connection with which a collecting bank is exclusively
authorized and directed to collect and process mail and Collections remitted to
each such post office box or bank box and to deposit such Collections into the
Collection Account, directly or through a Lock Box Account.
"Lock Box Notice" means, with respect to each Lock Box and Lock Box
Account, a letter in substantially the form of Exhibit F hereto from the Seller
to each Lock Box Bank.
"Margin" means, in the case of any Yield Period (or portion thereof)
1.50%, except that the Margin in the case of any Yield Period (or portion
thereof) (i) after March 31, 1994 will be 2.00% if no Facility Increase Event
has occurred on or prior to March 31, 1994, (ii) after the Commitment
Termination Date, provided that no Notice Date has occurred, 2.00% and (iii)
after the Commitment
-11-
<PAGE> 17
Termination Date, provided that (a) no Notice Date has occurred and (b) no
Facility Increase Event has occurred, 2.50%.
"Master Servicer" means JELD-WEN, in its capacity as Master Servicer
hereunder, and any successor Master Servicer designated by the Agent pursuant to
Section 10.01, including any Person assuming the duties of the Master Servicer
under Article Ten after being designated in a Successor Notice.
"Maturing Tranches" shall mean, as of any Settlement Date, those
Tranches for which such Settlement Date is the last day of the applicable
Payment Period.
"Miscellaneous Payments" means, with respect to any Receivable, any
amounts received from or on behalf of the related obligor representing
assessments and payments relating to real property taxes, insurance premiums,
transfer fees, late fees and service charges, annual dues payable to WorldMark
and condominium or homeowners' association fees.
"Monthly Charge-off Rate" means, in respect of any Collection Period, a
fraction, expressed as a percentage on a per annum basis, the numerator of which
is the Outstanding Principal Balances of all Receivables included in the
Receivables Pool that were charged-off by the Seller during such Collection
Period and the denominator of which is the average Outstanding Principal
Balances of all Receivables included in the Receivables Pool for each day in
such Collection Period.
"Monthly P&I" means, with respect to any Receivable, the scheduled
payment of principal and interest due in each Collection Period pursuant to the
related Receivable (which payment, if such Receivable is a Mortgage Loan
Receivable, is set forth in the related Mortgage Note).
"Mortgage" means the mortgage, deed of trust or other instrument
creating a first lien on the Mortgaged Property securing a Mortgage Note, forms
of which are attached hereto as Exhibit D.
"Mortgage Loan Receivables" means such of the mortgage loans originated
by Eagle Crest, acquired by the Seller and included in the Receivables Pool,
which mortgage loans are identified in the Schedule of Mortgage Loan
Receivables.
"Mortgage Note" means the promissory note or other evidence of
indebtedness executed by an Obligor that evidences the indebtedness of such
Obligor under a Mortgage Loan Receivable, forms of which are attached hereto as
Exhibit D.
"Mortgaged Property" means the property securing a Mortgage Note, which
may be either a Timeshare Estate or a Fractional Ownership Interest consisting
of a fee simple estate in real property located at the Project.
-12-
<PAGE> 18
"Net Pool Balance" means, as of any date, the aggregate Outstanding
Principal Balance of all Eligible Receivables included in the Receivables Pool
as of such date.
"Net Worth" means an amount equal to the tangible shareholders' equity
of the Seller as defined in accordance with generally accepted accounting
principles minus the fair market value of any securities owned by it prior to
the Closing Date (other than investment of monies on deposit in the Collection
Account).
"New Lock Box Accounts" shall have the meaning specified in Section
4.09.
"New Lock Boxes" shall have the meaning specified in Section 4.09.
"Notice Date" means the day on which the Agent, pursuant to Section
11.02, delivers or is deemed to have delivered to the Seller a notice of the
occurrence of a Termination Event and declaration that the Commitment is
terminated and all Obligations are due and payable (from Collections or
otherwise).
"Obligations" means (i) all obligations of the Seller to the Agent, the
Purchasers and their respective successors, permitted transferees and assigns
arising under or in connection with the Facility Documents, and (ii) all
obligations of the Seller to any Indemnified Party arising under Section 14.01,
in each case however created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due.
"Obligor" means any Person obligated to make payments on or in respect
of a Receivable, whether as a direct obligor or as a guarantor thereof.
"OECD Country" means a country which is a member of the grouping of
countries that are full members of the Organization of Economic Cooperation and
Development, plus countries that have concluded special lending arrangements
with the International Monetary Fund associated with its General Arrangements to
Borrow.
"Officer's Certificate" means a certificate signed by the president,
any vice president, the treasurer, the assistant treasurer, the secretary or the
assistant secretary of the Seller or the Master Servicer, as the case may be,
and delivered to the Agent.
"Original Principal Balance" means, with respect to any Receivable, the
amount set forth in such Receivable or, in the case of a Mortgage Loan
Receivable, on the related Mortgage Note, as the original principal balance of
such Receivable.
"Origination Date" means, with respect to any Receivable, the date
specified as the Origination Date on the related Schedule of
-13-
<PAGE> 19
Receivables, such date being represented to be (i) in the case of a Mortgage
Loan Receivable, the date on which the related Mortgage was recorded in the
public records in the jurisdiction in which the related Mortgaged Property is
located and (ii) in the case of a Right to Use Receivables, the date of
origination of such Right to Use Receivable.
"Originator" means TRI or Eagle Crest, as the case may be.
"Originator Receivables" means, as of any time, all right to use
timeshare receivables and mortgage loan timeshare receivables originated by the
related Originator, other than the Receivables, that have not been paid in full
or charged off.
"Outstanding Principal Balance" means, with respect to any Receivable
as of any date, its Original Principal Balance less all payments received on or
in respect of such Receivable on or prior to such date and allocable to
principal.
"Participant" shall have the meaning set forth in Section 13.03.
"Payment Period" means (i) for any Tranche for which the Earned Yield
is calculated at the LIBOR Rate, the Yield Period provided, however, that if a
Notice Date shall occur prior to the end of such Yield Period, the Payment
Period for such Tranche shall end on the Settlement Date next succeeding such
Notice Date; (ii) for any Tranche for which the Earned Yield is calculated at
the Reference Rate, that period commencing on the next day after the last day of
the immediately preceding Payment Period for such Tranche (or applicable portion
thereof), or if there has been no such preceding Payment Period, the date the
Purchasers' Investment in such Tranche was initially made by the Purchasers and,
in either case, continuing through and including the next succeeding Settlement
Date; and (iii) for any Tranche for which the Earned Yield is calculated at the
Termination Event Rate, that period commencing on (a) the next day after the
last day of the immediately preceding Payment Period for such Tranche (or
applicable portion thereof), or if there has been no such preceding Payment
Period, (b) the date the Purchasers' Investment in such Tranche (or applicable
portion thereof) was initially made by the Purchasers and, in either case,
continuing through and including the immediately succeeding Settlement Date.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Encumbrances" means, with respect to any Mortgaged Property,
(i) all Liens and encumbrances identified in the related Mortgage and (ii) all
other mortgages, deeds of trust or other security instruments on such Mortgaged
Property to the extent that such mortgages, deeds of trust or other security
instruments and the related promissory note or other evidence of indebtedness
are substantially similar to the Mortgages and Mortgage Notes,
-14-
<PAGE> 20
respectively, and relate to mortgage loan timeshare receivables substantially
similar to the Mortgage Loan Receivables.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Portfolio Yield" means, as of any Settlement Date, the difference
between (i) the product of (a) the amount of Collected Interest collected during
the related Collection Period and (b) the Purchasers' Interest for such
Collection Period, and (ii) the sum of (a) the Earned Yield in respect of such
Collection Period, whether or not paid and (b) the product of (1) the
Purchasers' Interest for such Collection Period and (2) the sum of the Servicing
Fee payable in respect of such Collection Period, the Outstanding Principal
Balance of all Receivables that were charged-off by the Seller during such
Collection Period and the Program Costs in respect of such Collection Period,
whether or not paid.
"Pro Rata Share" shall mean for each Purchaser the percentage set forth
opposite its name below.
Purchaser Pro Rata Share
--------- --------------
Seattle-First National Bank 100%
"Program Costs" means, in respect of any Collection Period, all
expenses and fees of the Seller payable during such Collection Period (other
than the Servicing Fee and Earned Yield), including but not limited to, fees
payable pursuant to Section 5.01.
"Project" means the respective land, buildings and appurtenant rights
which comprise the Eagle Crest Resort, Redmond, Oregon, within which each
Mortgaged Property is located.
"Purchase" means any purchase by the Purchasers of an Undivided
Interest from the Seller and includes, without limitation, Reinvestments.
"Purchase Agreements" means the Eagle Crest Purchase Agreement and the
TRI Purchase Agreement.
"Purchase Certificate" shall have the meaning set forth in Section
6.02(c).
"Purchase Notice" shall have the meaning set forth in Section 2.02(a).
"Purchase Price" means, with respect to any Defective Receivable, an
amount equal to the Outstanding Principal Balance of such Receivable as of the
last day of the Collection Period immediately preceding the Collection Period in
which such
-15-
<PAGE> 21
Receivable is being repurchased, together with interest thereon at the
applicable Receivable Interest Rate from the end of such immediately preceding
Collection Period through the current Collection Period.
"Purchase and Sale Agreement" means, with respect to any Mortgage Loan
Receivable, the related Eagle Crest Vacation Resort Ownership Purchase and Sale
Agreement, Escrow Instructions and Buyer's Receipt for Documents.
"Purchasers" means each of the Persons identified as a "Purchaser" in
the preamble to this Agreement and any of their respective successors.
"Purchasers' Interest" means, in respect of any Collection Period, a
fraction, the numerator of which is the average Aggregate Net Investment for
each day in such Collection Period and the denominator of which is the average
Outstanding Principal Balance of the Receivables comprising the Receivables Pool
for each day in such Collection Period.
"Purchasers' Investment" in any Undivided Interest means an amount
equal to the original amount paid to the Seller for such Undivided Interest at
the time of its initial acquisition by the Purchasers, as such amount may be
reduced from time to time by Collections received and distributed pursuant to
Sections 4.03 and 4.07. The Purchasers' Investment shall not be considered
reduced by any distribution of any portion of Collections if at any time such
distribution is rescinded or otherwise must be returned for any reason nor shall
the Purchasers' Investment be reduced or increased by any Reinvestment.
"Purchasers' Share" of any Collections means, (i) on any day on or
before the Commitment Termination Date, if no Notice Date shall have occurred,
the product of such amount and the Aggregate Undivided Interest on such day
(expressed as a percentage); (ii) on any day after the Commitment Termination
Date, if no Notice Date shall have occurred on or before the Commitment
Termination Date, the product of such amount and the Aggregate Undivided
Interest (expressed as a percentage) calculated as of the Commitment Termination
Date; and (iii) if a Notice Date shall have occurred on or before the Commitment
Termination Date, the product of such amount and the Aggregate Undivided
Interest (expressed as a percentage) calculated as of such Notice Date.
"Receivable Documents" means, with respect to any Receivable, all loan
agreements, security agreements, guarantees, pledges, mortgages, deeds of trust,
financing statements, certificates, instruments, agreements and other related
documents executed in connection with such Receivable (including, if such
Receivable is a Mortgage Loan Receivable, the related Mortgage, Mortgage Note
and Warranty Deed) or in connection with the Related Security.
-16-
<PAGE> 22
"Receivable Files" means the documents in respect of the Receivables
specified in Section 2.05.
"Receivable Interest Rate" means, with respect to a Receivable, the per
annum rate of interest or finance charge borne by such Receivable.
"Receivables" means the Right to Use Receivables and the Mortgage Loan
Receivables included in the Receivables Pool, and all proceeds thereof and
payments thereunder on and after the related Cutoff Date, which Receivables are
identified in the related Schedule of Receivables. Once so designated, a
Receivable shall continue to be a Receivable for all purposes hereunder until
(i) its Outstanding Principal Balance has been reduced to zero, (ii) the Seller
repurchases such Receivable pursuant to Section 7.04 or 15.01 or (iii) the
Seller substitutes a new Receivable for such Receivable therefor pursuant to
Section 15.02.
"Receivables Pool" means at any time all Receivables outstanding at
such time.
"Reference Bank" means a major bank selected from time to time by the
Agent that is active in the London interbank market.
"Reference Rate" means on any day the greater of (i) Seafirst's
publicly announced prime rate of interest (which prime rate is a reference rate
and not necessarily the lowest rate of interest at which Seafirst will make a
loan), as such prime rate changes from time to time (which changes shall become
effective concurrently with the announcement of such change by Seafirst) or (ii)
the sum of (a) the Federal Funds Rate and (b) 0.50% per annum.
"Regulation D" means Regulation D promulgated by the Board of Governors
of the Federal Reserve System, as amended.
"Reinvestment" means any Purchase made pursuant to Section 4.02.
"Related Security" means, with respect to any Receivable, all security,
guarantees and other collateral securing the obligations of the related obligor
under such Receivable, including, if such Receivable is a Mortgage Loan
Receivable, the related Mortgaged Property.
"Required Purchasers" means at any time Purchasers having an aggregate
Purchasers' Investment of at least 662/3%.
"Right to Use Receivable" means such of the right to use receivables
originated by TRI, acquired by the Seller and included in the Receivables Pool,
forms of which are attached hereto as Exhibit C, which right to use receivables
are identified in the Right to Use Receivables Schedule.
-17-
<PAGE> 23
"River View Vista Estates Association" means a non-profit corporation
organized under the laws of the State of Oregon having its principal place of
business at 821 South Sixth Street, Redmond, Oregon 97756, which corporation
owns and operates the facilities identified for the use and benefit of certain
owners of the Fractional Ownership Interests.
"Schedule of Mortgage Loan Receivables" means the schedule of Mortgage
Loan Receivables attached hereto as Schedule 4, as the same may be amended from
time to time. The Mortgage Loan Receivable Schedule shall set forth the
following information as to each Mortgage Loan Receivable: (i) its identifying
number; (ii) the name of and the mailing address for the related obligor; (iii)
the street address of the related Mortgaged Property; (iv) the original number
of months to maturity; (v) the number of months to maturity as of the related
Cutoff Date; (vi) the Origination Date; (vii) its Receivable Interest Rate;
(viii) its Due Date; (ix) its Original Principal Balance; (x) its Outstanding
Principal Balance as of the related Cutoff Date; (xi) whether the related
Mortgaged Property is a Fractional ownership Interest or a Timeshare Estate; and
(xii) the address at which the related Receivable File is maintained.
"Schedule of Receivables" means the Schedule of Right to Use
Receivables and the Schedule of Mortgage Loan Receivables.
"Schedule of Right to Use Receivables" means the schedule of Right to
Use Receivables attached hereto as Schedule 3, as the same may be amended or
supplemented from time to time. The Right to Use Receivable Schedule shall set
forth the following information as to each Right to Use Receivable: (i) its
identifying number; (ii) the name of and mailing address for the related
Obligor; (iii) the original number of months to maturity; (iv) the number of
months to maturity as of the related Cutoff Date; (v) its Receivable Interest
Rate; (vi) its Due Date; (vii) its Original Principal Balance; (viii) its
Outstanding Principal Balance as of the related Cutoff Date; (ix) its
Origination Date; and (x) the address at which the related Receivable File is
maintained.
"Seafirst" means Seattle-First National Bank, a national banking
association, and any successor thereto.
"Section 4.04 Deposits" shall have the meaning specified in Section
4.08.
"Seller" means TW HOLDINGS, INC., and any successor thereto.
"Servicing Fee" means the fee to be paid to the Master Servicer for
services rendered during each Collection Period, determined pursuant to Section
10.08.
"Settlement Date" means the tenth day of each month or, if such day is
not a Business Day, the immediately succeeding Business Day, commencing February
10, 1994.
-18-
<PAGE> 24
"Subordinated Notes" means the Eagle Crest Subordinated Note and the
TRI Subordinated Note.
"Subsequent Cutoff Date" means the date specified by the Seller in the
related Schedule of Receivables after which all payments owing under a
Subsequent Receivable shall be paid to or upon the order of the Agent as
directed pursuant to this Agreement.
"Subsequent Receivables" means any Receivable transferred to the Seller
after the Closing Date.
"Subservicer" means any subservicer engaged by the Master Servicer to
subservice a Receivable pursuant to Section 10.02.
"Subservicing Agreement" means an agreement between the Master Servicer
and a Subservicer relating to the servicing of one or more of the Receivables.
"Subsidiary" shall mean any corporation of which a majority (by number
of shares or by number of votes) of any class of outstanding capital stock
normally entitled to vote for the election of one or more directors (regardless
of any contingency which does or may suspend or dilute the voting rights of such
class) is at such time owned directly or indirectly by the Seller or JELD-WEN,
as the case may be, or by one or more of their respective Subsidiaries; provided
that notwithstanding the foregoing, any entity that is consolidated on the
balance sheet of another entity shall be a Subsidiary of the second entity for
purposes of this definition.
"Successor Notice" shall have the meaning specified in Section 10.01.
"Tax" means for any Person any tax, assessment, duty, levy, impost or
other charge imposed by any Governmental Authority on such Person or on any
property, revenue, income or franchise of such Person and any interest or
penalty with respect to any of the foregoing.
"Termination Event" shall have the meaning set forth in Section 11.01.
"Termination Event Rate" means a per annum rate equal to 1.5% above the
related Yield Rate in effect from time to time.
"Timeshare Estate" means a timeshare interval fee simple ownership
interest in a timeshare unit located in the Project which secures a Mortgage
Loan Receivable and which entitles the owner thereof to occupy a unit at the
Project for a particular interval, together with access to the accompanying
facilities at the Project.
"Tranche" means any portion of the Aggregate Net Investment (expressed
in dollars) accruing a yield at the same rate, and, in
-19-
<PAGE> 25
the case of portions of the Aggregate Net Investment accruing a yield at the
same LIBOR Rate, for the same Yield Period.
"Transfer Date" means the date as of which a Receivable is acquired by
the Purchaser.
"TRI" means Trendwest Resorts, Inc., an Oregon corporation, and any
successor thereto.
"TRI Purchase Agreement" means the Receivables Purchase Agreement,
dated as of the date hereof, between TRI and the Seller, and all amendments
thereof and supplements thereto as shall exist from time to time.
"TRI Subordinated Note" means the subordinated non-recourse note of the
Seller to TRI, dated the Closing Date; and all amendments thereof and
supplements thereto as shall exist from time to time.
"TW HOLDINGS" means TW HOLDINGS, INC., a Nevada corporation, and its
successors.
"UCC" means the Uniform Commercial Code as in effect in the related
jurisdiction.
"Undivided Interest" means, as of any date, for each Purchasers'
Investment, an undivided fractional ownership interest (owned ratably by the
Purchasers) equal to (i) the sum of (a) the Purchasers' Investment plus (b) 25%
of the Purchasers' Investment, divided by (ii) the Net Pool Balance.
"Unfront Fee" shall have the meaning specified in the Fee Letter.
"Unmatured Termination Event" means any event which with the giving of
notice, the passage of time or both would constitute a Termination Event.
"WorldMark" means WorldMark, The Club, a California nonprofit mutual
benefit corporation, and its successors.
"Yield Notice" shall have the meaning set forth in Section 3.02.
"Yield Period" means with respect to any Tranche for which the LIBOR
Rate has been selected as the Yield Rate, the period commencing on the first
date the Seller elects to have such LIBOR Rate apply (which date must be a
Settlement Date or, in the case of the first Yield Period, January 10, 1994) and
ending on the Settlement Date closest to a date one, two or three months
thereafter as specified in a Yield Notice given pursuant to Section 3.02.
-20-
<PAGE> 26
"Yield Rate" for any portion of the Purchasers' Investment means the
Reference Rate unless the Seller has made an effective selection of a LIBOR Rate
pursuant to Section 3.02, in which case, "Yield Rate" for such portion of the
Purchasers, Investment means such LIBOR Rate.
Section 1.02. Usage of Terms. With respect to all terms in this
Agreement, the singular includes the plural and the plural the singular; words
importing any gender include the other gender; references to "writing" include
printing, typing, lithography and other means of reproducing words in a visible
form; references to agreements and other contractual instruments include all
subsequent amendments thereto or changes therein entered into in accordance with
their respective terms and not prohibited by this Agreement; references to
Persons include their permitted successors and assigns; and the term "including"
means "including without limitation."
Section 1.03. Accounting Term. Except as otherwise provided herein,
accounting terms not specifically defined shall be construed, and all accounting
procedures shall be performed, in accordance with generally accepted accounting
principles in the United States consistently applied.
ARTICLE TWO
THE COMMITMENT; TRANSFER OF RECEIVABLES
Section 2.01. The Commitment. On the terms and subject to the
conditions set forth in this Agreement, and in reliance upon the representations
and warranties herein set forth, each Purchaser, severally and for itself alone,
agrees to purchase from time to time prior to the Commitment Termination Date,
pro rata shares of Undivided Interests from the Seller, each of which shall be
in an amount equal to such Purchaser's Pro Rata Share of the aggregate amount of
the requested Purchase; provided, however, that under no circumstances will any
Purchaser be obligated to make any Purchase to the extent that, after giving
effect to such Purchase, (i) the Aggregate Net Investment would exceed the
Aggregate Net Investment Limit, (ii) such Purchaser's Pro Rata Share of the
Aggregate Net Investment would exceed the amount of its Pro Rata Share of the
Commitment Amount or (iii) the Collateral Percentage as of the date of the
proposed Purchase (after giving effect to such Purchase and all Purchases to be
made on or prior to such date) would be less than 125%.
Section 2.02. Certain Purchase Procedures.
(a) Purchases Other Than Reinvestments. Except in the case of a
Purchase which is a Reinvestment, the Seller shall deliver to the Agent a notice
setting forth the details of each proposed Purchase, substantially in the form
of Exhibit A hereto (a "Purchase Notice"), no later than 11:00 a.m., Seattle
time, on the Business Day immediately preceding the date of the proposed
-21-
<PAGE> 27
Purchase; provided, however, if the Seller shall select the LIBOR Rate as the
initial Yield Rate for such proposed Purchase, the Purchase Notice shall be
delivered to the Agent prior to 11:00 a.m., Seattle time, at least three
Business Days before the date of such proposed Purchase. Notwithstanding the
foregoing, in the case of the initial Purchase to be made on the Closing Date,
the related Purchase Notice can be delivered to the Agent on the Closing Date.
Purchase Notices received after 11:00 a.m., Seattle time, on any Business Day
will be deemed received on the immediately succeeding Business Day. Each
Purchase Notice shall set forth the proposed amount of the Purchase, which shall
be an integral multiple of $100,000 and not less than $1,000,000, and the
proposed date of Purchase, which, except for the initial Purchase on the Closing
Date, shall be a Settlement Date occurring prior to the Commitment Termination
Date. Such notice shall be irrevocable and shall be deemed to constitute a
representation and warranty by the Seller that as of the date of the Purchase
Notice, all of the representations and warranties of the Seller set forth in
Article Seven are true and correct and that no Unmatured Termination Event or
Termination Event has occurred and is continuing. Upon receipt of a Purchase
Notice, the Agent shall promptly notify each Purchaser by telephone (confirmed
by facsimile transmission), or facsimile transmission of the date and time of
the proposed Purchase. Each Purchaser shall before 11:00 a.m., Seattle time, on
the date of such Purchase (other than a Reinvestment), remit an amount equal to
the lesser of (i) such Purchasers Pro Rata Share of the amount of the Purchase
identified in the Purchase Notice or (ii) the maximum amount such Purchaser is
committed to pay pursuant to Section 2.01, in immediately available funds to the
Agent at its Commercial Loan Service Center, Seattle, Washington. Upon
fulfillment to the Agent's satisfaction of the applicable conditions set forth
in Article Six, and after receipt by the Agent of such funds, the Agent will
promptly make such immediately available funds available to the Seller by
depositing them to an ordinary checking account maintained for such purpose by
the Seller with the Agent.
(b) Reinvestments. Reinvestments shall be made by permitting the Master
Servicer to apply each Purchaser's Pro Rata Share of the Purchasers, Share of
Collected Principal towards the purchase of additional Undivided Interests
pursuant to Section 4.02.
Section 2.03. Extension of Commitment Termination Date. The Seller may
request, on an annual basis, a one-year extension of the Commitment Termination
Date. Such request must be delivered in writing to the Agent and each Purchaser
no later than five months prior to the then-scheduled Commitment Termination
Date. Each Purchaser shall notify the Seller and the Agent in writing no later
than three months prior to the then-scheduled Commitment Termination Date, if it
agrees to the extension of the Commitment Termination Date, which decision shall
be made in its sole discretion. If all Purchasers agree to the extension, the
Commitment Termination Date shall be extended for one year. If any Purchaser
does not notify the Agent in writing that it agrees to
-22-
<PAGE> 28
such an extension at least three months before the then-scheduled Commitment
Termination Date, the Agent shall notify the other Purchasers thereof and the
Seller shall have the right, subject to Section 13.02, to designate another bank
or financial institution, which may be a Purchaser, which is acceptable to the
Agent to purchase at par (on any Settlement Date prior to a day two months
before the then-scheduled Commitment Termination Date) such declining Purchasers
Pro Rata Share of the Aggregate Net Investment and to assume such Purchaser's
Pro Rata Share of the Commitment without recourse to or warranty by, or expense
to, such Purchaser except that such declining Purchaser shall be deemed to have
represented and warranted to the Seller and to the replacement Purchaser that
its Pro Rata Share of the Aggregate Net Investment is free of any Liens created
by or arising under such declining Purchaser. If the Seller designates another
bank or financial institution pursuant to the preceding sentence, the declining
Purchaser shall be obligated to sell its Undivided Interest to the replacement
Purchaser upon such terms. If no such replacement Purchaser is found, the
Commitment Termination Date shall not be extended.
Section 2.04. Conveyance of Receivables.
(a) In consideration of the obligation of the Purchasers to make
purchases from time to time pursuant to this Agreement, on each Transfer Date,
the Seller does hereby transfer, assign and otherwise convey to the Agent for
the benefit of the Purchasers, without recourse (subject to the obligations of
the Seller herein), all of its right, title and interest in, to and under the
Assigned Collateral obtained by the Seller on such Transfer Date (or all
Assigned Collateral owned as of the Closing Date in the case of the first
Transfer Date) . Notwithstanding the foregoing, the Seller cannot convey any
Mortgage Loan Receivables to the Agent unless the Seller shall have received
notice from the Agent (acting upon the direction of the Required Purchasers)
that the Purchasers have satisfied all related appraisal and evaluation
requirements with respect to the related Mortgaged Properties under FIRREA.
(b) In connection with each transfer and assignment described in
Section 2.04(a), on or prior to the related Transfer Date the Seller will (i)
deliver to the Agent (A) a revised Schedule of Mortgage Loan Receivables and/or
a revised Schedule of Right to Use Receivables, as the case may be, listing all
of the Receivables being conveyed on the related Transfer Date and all of the
related Receivables previously conveyed pursuant to this Agreement, and (B) an
Officer's Certificate of the Seller to the effect that the related Receivable
Files have been delivered to or upon the order of the Master Servicer, as
custodian for the Agent, and that the following legend (or the substantive
equivalent thereof) has been placed on each of the above-referenced files, on
each copy of the Mortgage Notes and on each of the data processing reports that
the Master Servicer, the Seller or the originators generates which are of the
type which a potential purchaser or lender would reasonably be expected to
review to evaluate the Receivables: "Undivided
-23-
<PAGE> 29
Interests in the Receivable(s) described herein have been sold to various
Purchasers pursuant to a Receivables Transfer Agreement, dated as of December 1,
1993, among TW HOLDINGS, INC., the Purchasers, Seattle-First National Bank, as
Agent, and JELD-WEN, inc.," and (ii) file in the appropriate offices in the
jurisdictions where filing of a UCC-1 financing statement is necessary or
appropriate, such UCC-1 financing statements shall be executed by the Seller as
debtor, naming the Agent, acting on behalf of the Purchasers, as secured party
and listing the related Assigned Collateral as collateral. In connection with
such filing, the Seller agrees that it shall cause to be filed all necessary
continuation statements and to take or cause to be taken such actions and
execute such documents as are necessary to perfect the interests of the
Purchasers in such Assigned Collateral. File-stamped copies of each such
financing statement or continuation statement shall be delivered to the Agent as
soon they are received by the Seller.
(c) In connection with the first transfer and assignment pursuant to
Section 2.04 (a) of Right to Use Receivables, and the first such transfer and
assignment of Mortgage Loan Receivables, the Seller will deliver to the Agent an
opinion of counsel to the effect that the Agent will have a first perfected
security interest in such Receivables (and, in the case of Mortgage Loan
Receivables, a first perfected security interest in the related Mortgage Notes),
all collections on or in respect of such Receivables after the related Cutoff
Date and all proceeds of the foregoing.
(d) On each anniversary of the First Settlement Date, the Seller will
deliver to the Agent an opinion of counsel to the effect that in respect of all
Receivables transferred and assigned pursuant to Section 2.04 (a) since the
first such transfer and assignment (or, in the case of each anniversary of the
first Settlement Date after the first such anniversary, Receivables so
transferred and assigned during the past year) the Agent has a first perfected
security interest in such Receivables (and, in the case of Mortgage Loan
Receivables, a first perfected security interest in the related Mortgage Notes),
all collections on or in respect of such Receivables after the related Cutoff
Dates and all proceeds of the foregoing.
(e) It is the intention of the Seller that the transfers and
assignments contemplated by this Agreement shall constitute a sale of
Receivables in an aggregate principal amount up to the Commitment Amount from
the Seller to the Agent, on behalf of the Purchasers, and the beneficial
interest in and title to such Receivables shall not be part of the Seller's
estate in the event of the filing or a bankruptcy petition by or against the
Seller under any bankruptcy law. In the event that the transfers and assignments
contemplated by this Agreement are deemed to be other than a sale, this
Agreement shall be deemed to be and in such event hereby is the grant of a
security interest from the Seller to the Agent in the Assigned Collateral and
the Agent, on behalf of the Purchasers, shall have all the rights, powers and
privileges of a
-24-
<PAGE> 30
secured party under the UCC. In such event, the Seller agrees to take such
action and execute such documents as the Agent shall reasonably request in order
fully to realize the benefits of such secured party status, including, without
limitation, powers of attorney, financing statements, notices of lien or other
instruments or documents.
Section 2.05. Custody of Receivable Files.
(a) To assure uniform quality in servicing the Receivables and to
reduce administrative costs, the Agent, upon the execution and delivery of this
Agreement, revocably appoints the Master Servicer, and the Master Servicer
accepts such appointment, to act as the agent of the Agent as custodian of the
following documents or instruments, directly or through one or more Subservicers
which are hereby constructively delivered to the Agent, and of which the Master
Servicer shall acknowledge receipt thereof, with respect to each Receivable
assigned and transferred on the related Transfer Date:
(i) the fully executed original of the Receivable;
(ii) documents evidencing or relating to any insurance policy
relating to such Receivable, the related Obligor and, if such
Receivable is a Mortgage Loan Receivable, the related Mortgaged
Property;
(iii) in the case of a Mortgage Loan Receivable, the original
Mortgage Note endorsed (which endorsement may be by manual or facsimile
signature) by the Seller without recourse to the order of the Agent in
the following form: "Without recourse, pay to the order of
Seattle-First National Bank, as Agent of the Purchasers under the
Receivables Transfer Agreement, dated as of December 1, 1993, among TW
HOLDINGS, INC., the Agent, the Purchasers and JELD-WEN, inc.";
(iv) in the case of a Mortgage Loan Receivable, a recorded
Assignment to the Agent, acting on behalf of the Purchasers, of the
related Mortgage or, if the Seller provides the Agent with an opinion
of counsel admitted to practice law in the state in which the related
Mortgaged Property is located to the effect that recordation is not
necessary to secure the interest in such Mortgaged Property in the name
of the Agent, an assignment in recordable form;
(v) in the case of a Mortgage Loan Receivable, originals of all
intervening Assignments with evidence of recording indicated thereon;
(vi) in the case of a Mortgage Loan Receivable, the related
Mortgage, with evidence of recording indicated thereon;
-25-
<PAGE> 31
(vii) originals of all assumption, modification and substitution
agreements where the terms or provisions of such Receivable and, if
such Receivable is a Mortgage Loan Receivable, the related Mortgage or
Mortgage Note, have been modified or such Receivable, Mortgage or
Mortgage Note have been assumed; and
(viii) copies of all other Receivable Documents and any and all
other documents that the Seller, the related Obligor or the Master
Servicer, as the case may be, shall keep on file, in accordance with
its customary procedures, relating to such Receivable, the related
Obligor and, if such Receivable is a Mortgage Loan Receivable, the
related Mortgaged Property.
(b) If the Seller cannot deliver any original Mortgage or mortgage
Assignment with evidence of recording thereon to or upon the order of the Agent
on the related Transfer Date solely because of a delay caused by the public
recording office where such original Mortgage or mortgage Assignment has been
delivered for recordation, the Seller shall deliver an Officer's Certificate to
the Agent, with a photocopy of such Mortgage or mortgage Assignment attached
thereto, stating that such original Mortgage or mortgage Assignment has been
delivered to the appropriate public recording official for recordation. The
Seller shall promptly deliver to or upon the order of the Agent such original
Mortgage or mortgage Assignment with evidence of recording indicated thereon
upon receipt thereof from such public recording official. If the Seller within
90 days from such Transfer Date shall not have received such original Mortgage
or mortgage assignment from the related public recording official, it shall
obtain, and deliver to the Agent a copy of such original Mortgage or mortgage
Assignment, certified by such public recording official to be a true and
complete copy of such original Mortgage or mortgage assignment as recorded by
such public recording office. Notwithstanding the foregoing, in the event that,
for whatever reason, the Seller fails to deliver to the Agent in respect of a
Mortgaged Loan Receivable either an opinion of counsel pursuant to Section
2.05(a)(iv) or a recorded Assignment of mortgage with evidence of recording
thereon in favor of the Agent within 90 days after the related Transfer Date,
the Seller will be required to repurchase such Mortgage Loan Receivable pursuant
to Section 7.04.
Section 2.06. Duties of Master Servicer as Custodian.
(a) The Master Servicer, in its capacity as custodian, shall hold the
Receivable Files on behalf of the Agent for the use and benefit of all
Purchasers, and maintain such accurate and complete accounts, records and
computer systems pertaining to each Receivable. The Receivable Files will be
marked and physically separated from the files relating to all other right to
use timeshare receivables and mortgage loan timeshare receivables that the
Master Servicer services on behalf of itself or others. In performing its duties
as custodian, the Master Servicer shall act with reasonable care, using that
degree of skill and attention that
-26-
<PAGE> 32
it exercises with respect to comparable receivables that it services for itself
or others. The Master Servicer shall conduct, or cause to be conducted, periodic
reviews of the files of all receivables owned or serviced by it which shall
include the Receivable Files held by it under this Agreement, and of the related
accounts, records and computer systems, in such a manner as shall enable the
Agent to verify the accuracy of the Master Servicer's record keeping. The Master
Servicer shall promptly report to the Agent any failure on its part to hold the
Receivable Files and maintain its accounts, records and computer systems as
herein provided and promptly take appropriate action to remedy any such failure.
(b) The Master Servicer shall maintain each Receivable File at one of
the locations set forth in Schedule 5 hereto, or at such other location or
locations as shall be specified to the Agent by 30 days' prior written notice
(and each such location shall be added to a revised Schedule 5). The Master
Servicer shall make available to the Agent or its duly authorized
representatives, attorneys or auditors the Receivable Files and the related
accounts, records and computer systems maintained by the Master Servicer at such
times as the Agent may reasonably request.
(c) Upon instruction from the Agent, the Master Servicer shall release
any document in the Receivable Files to the Agent or its agent or designee, as
the case may be, at such place or places as the Agent may designate, as soon as
practicable. The Master Servicer shall not be responsible for any loss
occasioned by the failure of the Agent to return any document or any delay in
doing so.
Section 2.07. Instructions; Authority to Act. The Master Servicer shall
be deemed to have received proper instructions with respect to the Receivable
Files upon its receipt of written instructions signed by an authorized officer
of the Agent. A certified copy of a bylaw or of a resolution of the Board of
Directors of the Agent shall constitute conclusive evidence of the authority of
any such authorized officer to act and shall be considered in full force and
effect until receipt by the Master Servicer of written notice to the contrary
given by the Agent.
Section 2.08. Indemnification by Master Servicer as Custodian. The
Master Servicer, as custodian, shall indemnify the Agent and the Purchasers for
any and all liabilities, obligations, losses, compensatory damages, payments,
costs or expenses of any kind whatsoever that may be imposed on, incurred or
asserted against the Agent and the Purchasers as the result of any improper act
or omission in any way relating to the maintenance and custody by the Master
Servicer, as custodian, of the Receivable Files; provided, however, that the
Master Servicer shall not be liable for any portion of any such amount resulting
from the willful misfeasance, bad faith or negligence of the Agent, any
Purchaser or any successor Master Servicer.
-27-
<PAGE> 33
Section 2.09. Effective Period and Termination. The Master Servicer's
appointment as custodian shall become effective as of the Closing Date and shall
continue in full force and effect until terminated pursuant to this Section. If,
pursuant to Section 10.01, the Master Servicer shall resign as Master Servicer
or if all of its rights and obligations may have been terminated, the
appointment of the Master Servicer as custodian shall be terminated by the Agent
(acting upon the direction of the Required Purchasers), in the same manner as
the Agent or such Purchasers may terminate the rights and obligations of the
Master Servicer pursuant to Section 10.01. The Agent may terminate the Master
Servicer's appointment as custodian, with cause at any time upon written notice
to the Master Servicer, and without cause upon 30 days' prior written notice to
the Master Servicer. As soon as practicable after any termination of such
appointment, the Master Servicer shall deliver the Receivable Files to or upon
the order of the Agent at such place or places as the Agent may reasonably
designate. Notwithstanding the termination of the Master Servicer as custodian,
the Agent agrees that upon any such termination, the Agent shall provide, or
cause its agent to provide, access to the Receivable Files to the Master
Servicer for the purpose of carrying out its duties and responsibilities with
respect to the servicing of the Receivables hereunder.
ARTICLE THREE
EARNED YIELD
Section 3.01. Earned Yield. The Purchasers shall be entitled to
receive, and the Seller agrees to cause the Master Servicer to pay to the Agent,
out of Collections, for the account of each Purchaser, an amount (the "Earned
Yield") equal to the product of (i) the Aggregate Net Investment from the date
an Undivided Interest was first purchased until the Aggregate Net Investment is
reduced to zero on a day following the Commitment Termination Date and (ii) (A)
the applicable Yield Rate at all times prior to a Notice Date or (B) the
Termination Event Rate at all times on and after a Notice Date.
Section 3.02. Selection of Yield. The Seller may, subject to the
requirements of this Section, on at least three Business Days' prior written
notice, select the LIBOR Rate as the Yield Rate for all or any portion of the
Aggregate Net Investment for any applicable Yield Period. Such notice (a "Yield
Notice") shall be deemed delivered on receipt by the Agent except that any Yield
Notice received by the Agent after 11:00 a.m., Seattle time, on any day, shall
be deemed to have been received on the immediately succeeding Business Day. Each
Yield Notice shall identify, subject to the conditions of this Section, the
dollar amount of the Tranche for which the LIBOR Rate is to apply and the Yield
Period selected by the Seller. Such Yield Notice shall be irrevocable and shall
constitute a representation and warranty by the Seller that as of the date of
such Yield Notice, the representations and warranties of the Seller set forth in
Article Seven are true and correct and
-28-
<PAGE> 34
that no Unmatured Termination Event or Termination Event has occurred and is
continuing. Upon receipt of a Yield Notice, the Agent shall promptly notify each
Purchaser by telephone (confirmed by facsimile transmission) of the information
set forth therein. The Seller's right to select the LIBOR Rate as the Yield Rate
for all or any portion of the Aggregate Net Investment shall be subject to the
following conditions: (i) the amount of any Tranche for which the yield is to be
calculated at a particular LIBOR Rate for the same Yield Period shall be an
integral multiple of not less than $100,000; (ii) a LIBOR Rate may not be
selected for all or any portion of a Tranche which is already accruing interest
at a LIBOR Rate unless such selection is only to become effective at the
maturity of the Yield Period then in effect; (iii) the Agent or any Purchaser
shall not have given notice pursuant to Section,3.04 that the LIBOR Rate is not
available; and (iv) no Unmatured Termination Event or Termination Event shall
have occurred and be continuing. Any Yield Notice which specifies a LIBOR Rate
but which fails to specify a Yield Period shall be deemed to have specified a
Yield Period ending on a Settlement Date nearest to the date one month after the
first day of such Yield Period. The Yield Notice may be given with and contained
in any Purchase Notice. In the absence of an effective request for the
application of a LIBOR Rate for all or any portion of the Aggregate Net
Investment, the Yield Rate for the Aggregate Net Investment (or portion thereof)
shall be the Reference Rate.
Section 3.03. Applicable Days For Computation of Yield. Computations of
Earned Yield based on (i) the LIBOR Rate shall be made on the basis of a year of
360 days, and (ii) the Reference Rate shall be made on the basis of a year of
365 or 366 days, as the case may be, in each case for the actual number of days
(including the first day but excluding the last day) occurring in the period for
which such Earned Yield is payable.
Section 3.04. Unavailable LIBOR Rate. If in the reasonable judgment of
any Purchaser, for any reason fair and adequate means do not exist for
establishing a particular LIBOR Rate or that obtaining a yield on any Tranche at
a LIBOR Rate by such Purchaser has become unlawful, such Purchaser may give
notice thereof to the Agent and the Seller. After such notice has been given and
until such Purchaser notifies the Seller and the Agent that the circumstances
giving rise to such notice no longer exist, the LIBOR Rate shall no longer be
available. Thereafter, any attempt by the Seller to select the LIBOR Rate as the
Yield Rate shall be ineffective. If the circumstances giving rise to the notice
described herein no longer exist, the Purchaser shall notify the Seller and
Agent in writing, and the Seller shall then once again become entitled to select
the LIBOR Rate as the Yield Rate in accordance with Section 3.02.
Section 3.05. Yield Protection. In the event that after the date hereof
any change occurs in any applicable law, regulation, guideline, treaty or
directive or interpretation thereof by any authority charged with the
administration or interpretation
-29-
<PAGE> 35
thereof, or any condition is imposed by any authority after the date hereof or
any change occurs in any condition imposed by any authority on or prior to the
date hereof which:
(i) subjects any Purchaser to any Tax, or changes the basis of
taxation of any payments to any Purchaser made under any Facility
Document with respect to any Undivided Interest owned by it or with
respect to its obligation or right to make Purchases (other than a
change in the rate of tax based solely on the overall net or gross
income of such Purchaser);
(ii) imposes, modifies or determines applicable any reserve,
deposit, assessment or similar requirement against any assets held by,
deposits with or for the account of, or credit extended by, any office
of any Purchaser;
(iii) affects the amount of capital required or expected to be
maintained by any Purchaser or any corporation controlling such
Purchaser with respect to any Undivided Interest owned by it or with
respect to its obligation or right to make Purchases; or
(iv) imposes upon any Purchaser any other condition with respect
to any Undivided Interest owned by it or with respect to its obligation
or right to make Purchases;
and, the result thereof is, or would be, (a) to increase the cost to any
Purchaser in respect of making, issuing, maintaining or committing to make,
issue or maintain any Undivided Interest (other than any Undivided Interest to
the extent that the Reference Rate is applicable thereto) , (b) to reduce the
amount of any sum received or receivable by any Purchaser under any Facility
Document or (c) in the reasonable determination of any Purchaser, to reduce the
rate of return on such Purchaser's capital as a consequence of its obligations
hereunder or arising in connection herewith to a level below that which such
Purchaser would otherwise have achieved, then, upon demand by such Purchaser,
the Seller shall immediately pay to such Purchaser additional amounts which
shall be sufficient to compensate it for such increased costs incurred or
reduced receipts suffered thereby for a period not to exceed 90 days prior to
the date of such demand.
A certificate of a Purchaser as to such increased costs incurred or
reduced receipts suffered as a result of any event mentioned in clause (i)
through (iv) above submitted to the Seller specifying the event causing such
increased cost or reduced receipt and setting forth in reasonable detail the
calculation made to determine the amount of such increased cost or reduced
receipt and the assumptions used in calculating such amount shall be
presumptively correct as to the amount thereof, if such assumptions are
reasonable and there are not demonstrable errors in such calculation. Each
Purchaser shall exercise reasonable efforts to minimize such increased costs or
reduced receipts.
-30-
<PAGE> 36
The protection of this Section shall be available to each Purchaser
regardless of any possible contention of invalidity or inapplicability of the
relevant law, regulation, guideline, treaty, directive, condition or
interpretation thereof. In the event that the Seller pays any Purchaser the
amount necessary to compensate such Purchaser for any charge, deduction or
payment incurred or made by it as provided in this Section, and such charge,
deduction or payment or any part thereof is subsequently returned to such
Purchaser as a result of the final determination of the invalidity or
inapplicability of the relevant law, regulation, guideline, treaty, directive or
condition, then such Purchaser shall remit to the Seller the amount paid by the
Seller which has actually been returned to such Purchaser (together with any
interest actually paid to Purchaser on such returned amount) less such
Purchaser's costs and expenses incurred in connection with such governmental
regulation or any challenge made by such Purchaser with respect to its validity
or applicability.
Section 3.06. Funding Losses. In the event that any Purchaser shall
incur any loss or expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Purchaser to finance a portion of the Aggregate Net Investment for which Earned
Yield was or was to be calculated at the LIBOR Rate) as a result of
(i) any payment in respect of any Tranche made on a date other
than the Settlement Date initially established for such Tranche (to the
extent that the Earned Yield related thereto was initially calculated
by reference to the LIBOR Rate) whether voluntary, involuntary, the
result of the collection efforts of the Agent or one or more
Purchasers, or the result of any change in a Payment Period following a
Notice Date;
(ii) any repurchase of all or any portion of a Tranche pursuant
to Section 15.01 on a day other than a Settlement Date for such Tranche
(to the extent that the Earned Yield related to such Tranche was
calculated by reference to the LIBOR Rate); or
(iii) any Purchase (in connection with which a Yield Notice
electing a LIBOR Rate was delivered) not being made in accordance with
the Purchase Notice therefor;
such Purchaser shall give the Seller and the Agent written notice of such event
specifying the amount that will, in the reasonable opinion of such Purchaser,
reimburse it for such loss or expense and setting forth in reasonable detail the
calculation made to determine the amount of such loss or expense and the
assumptions used in calculating such amount shall be presumptively correct as to
the amount thereof, if such assumptions are reasonable and there are not
demonstrable errors in such calculation. The Seller shall, within five Business
Days after the receipt of such notice, pay such amount to such Purchaser.
-31-
<PAGE> 37
ARTICLE FOUR
COLLECTIONS AND SETTLEMENTS
Section 4.01. Collections. On each day during each Collection Period,
the Master Servicer shall collect the Purchasers' Share of Collected Principal
and the Purchaser's Share of Collected Interest received or deemed received on
such day and shall hold such funds in trust for the benefit of the Purchasers
and shall collect all other Collected Principal and Collected Interest so
received or deemed received and shall hold such funds in trust for the benefit
of the Seller. Except as otherwise provided in Sections 4.04, 4.08 and 4.09,
Collections received by the Master Servicer need not be segregated from other
funds of the Master Servicer. In the event that the Seller receives any payments
on or in respect of a Receivable subsequent to the related Transfer Date, the
Seller shall remit such amount to the Master Servicer within two Business Days
of receipt.
Section 4.02. Reinvestments. Subject to the satisfaction of the
conditions set forth in Section 6.02, the Seller's right to make a contrary
election pursuant to Section 4.03(a)(iii) and subject to Section 4.03(b)(ii) ,
provided that no Notice Date shall have occurred, on each Settlement Date on or
prior to the Commitment Termination Date, the Master Servicer shall be deemed to
have reinvested (for the benefit of the Purchasers) the Purchasers' Share of
Collected Principal received during the related Collection Period in additional
Undivided Interests in the Receivables Pool. In the event any such funds cannot
be reinvested on the date received because the conditions set forth in Section
6.02 have not been satisfied, they shall be deemed reinvested on the first day
thereafter on which such conditions shall be satisfied unless sooner paid to the
Agent on any Settlement Date. Neither the Purchasers' Investment, the Earned
Yield thereon nor any Obligation shall be deemed reduced or paid on account of
such unreinvested Collections until such amount is paid to the Agent on a
Settlement Date.
Section 4.03. Settlement Procedures.
(a) Prior to Termination Event. Subject to Section 4.04 and except as
otherwise provided in Section 4.03(b), on each Settlement Date which is the last
day of a Payment Period, the Seller shall cause the Master Servicer to pay to
the Agent:
(i) from the Purchaser's Share of Collected Interest collected
since the last Settlement Date on which any payment was due under this
Section and from the Purchaser's Share of Collected Interest collected
prior thereto and allocated but unpaid with respect to the Earned Yield
on the Aggregate Net Investment (as Collected Interest has been reduced
to pay the Servicing Fee, including any unpaid Servicing Fee in respect
of one or more prior Collection Periods, to the Master Servicer
pursuant to Section 10.08), the lesser of (A) the
-32-
<PAGE> 38
unpaid Earned Yield on the Purchasers' Investment in each Maturing
Tranche accrued to (but excluding) such Settlement Date, or (B) the
amount of the Purchaser's Share of Collected Interest collected since
the last Settlement Date on which any payment was due under this
Section plus the amount of the Purchaser's Share of Collected Interest
collected prior thereto and allocated but unpaid with respect to the
Earned Yield on the Aggregate Net Investment (as Collected Interest has
been so reduced); and
(ii) from the Purchasers, Share of Collected Principal collected
since the last Settlement Date on which any payment was due under this
Section, the amount of the Purchasers' Share of Collected Principal so
collected less any amounts that the Master Servicer has been deemed to
have reinvested from such Collections pursuant to Section 4.02;
provided, that notwithstanding the terms of Section 4.02, if on any
Settlement Date which is the last day of a Payment Period, the Seller
so notifies the Agent in writing, the Master Servicer shall pay to the
Agent any amount selected by the Seller up to the amount of the
Purchasers, Share of Collected Principal collected since the last
Settlement Date on which any payment was due under this Section. If the
Seller elects to cause the Master Servicer to make such a payment, the
amount so paid shall be deemed not to have been reinvested pursuant to
Section 4.02.
(b) Subsequent to Termination Event. If a Notice Date shall have
occurred on or before any Settlement Date, in addition to all other remedies
provided for herein, on such Settlement Date the Seller shall cause the Master
Servicer to pay to the Agent:
(i) the Purchaser's Share of Collected Interest collected since
the last Settlement Date on which any payment was due under this
Section (as Collected Interest has been reduced to pay the Servicing
Fee, including any unpaid Servicing Fee in respect of one or more prior
Collection Periods); and
(ii) from the Purchasers' Share of Collected Principal collected
since the last Settlement Date on which any payment was due under this
Section, the amount of the Purchasers' Share of Collected Principal so
collected. To the extent that pursuant to Section 4.02, the Master
Servicer would have been deemed to have reinvested some or all of the
Purchasers' Share of Collected Principal which the Seller is required
to pay to the Agent pursuant to Section 4. 03 (b) , such reinvestment
shall be deemed not to have occurred.
Section 4.04. Deposits to Collection Account to Avoid Break- Funding
Costs. In the event that on any Settlement Date the Seller would, pursuant to
Section 4.03(a)(ii), be required to disburse principal payments to the Agent for
a Tranche for which the LIBOR Rate was selected as the Yield Rate prior to the
last day of the
-33-
<PAGE> 39
applicable Payment Period for such Tranche, in order to avoid possible funding
losses which could result from such accelerated payment, on such Settlement Date
the Seller shall deposit to the Collection Account, in lieu of paying such
amount to the Agent pursuant to Section 4.03(a)(ii) , an amount equal to (a)
such amount less (b) the sum of (i) the Dollar amount of all then Maturing
Tranches for which the Earned Yield is calculated in respect of the LIBOR Rate
and (ii) the Dollar amount of all Tranches (whether Maturing Tranches or not)
for which the Earned Yield is calculated in respect of the Reference Rate.
Neither the Purchasers' Investment, the Earned Yield thereon nor any Obligation
shall be deemed reduced or paid on account of the deposit of such amounts to the
Collection Account.
Section 4.05. Deemed Collections. If on any day, any of the Seller's
representations or warranties set forth in Sections 7.01, 7.02 or 7.03 shall
prove to have been untrue when made with respect to any Receivable in the
Receivables Pool or the Seller shall be in breach of its obligations under
Sections 8.01(d), 8.01(e), 8.01 (f) or 9.01 in respect of any Receivable in the
Receivables Pool, then the Seller shall be deemed to have received on such day a
Collection of such Receivable in full, the Seller shall transfer an amount equal
to such deemed collection to the Master Servicer and the Master Servicer shall
reinvest and distribute such payment pursuant to Sections 4.02, 4.03 and 4.04,
as the case may be, as if such payment actually had been received by the Seller
on such day from the Obligor of such Receivable. Payments under this Section
shall not constitute a payment under the indemnity provisions of Article
Fourteen.
Section 4.06. Allocation of Payments and Collections.
(a) Except as otherwise required by law or the related Receivable
Documents and subject to the provisions under 4.06(b) below, all amounts
collected on or in respect of each Receivable shall be applied first against
fees, expenses and indemnities due in respect of such Receivable, second,
against interest due in respect of such Receivable and thereafter against the
obligations of the related Obligor to repay the principal amount thereof.
(b) On each Settlement Date, Collections (other than Collections
reinvested pursuant to Section 4. 02) shall be applied by the Master Servicer in
the following amounts and in the following order of priority:
(i) to the Master Servicer, an amount equal to the Servicing Fee
in respect of the related Collection Period any unpaid Servicing Fee in
respect of one or more prior Collection Periods;
(ii) to the Agent, any amount payable pursuant to Section 4.03;
-34-
<PAGE> 40
(iii) to the Agent, an amount equal to all Program Costs due to
the Agent payable during the related Collection Period; and
(iv) any remaining Collections shall be paid to the Seller, free
and clear of all Liens.
Section 4.07. Order of Distribution by the Agent. On each Settlement
Date on which the Agent receives any payments pursuant to Sections 4.03 or 4.08,
the Agent shall distribute such funds to the Purchasers first in payment of the
unpaid Earned Yield on the Purchasers, Investment in the Maturing Tranche
accrued to (but excluding) such Settlement Date, and thereafter in reduction of
the Aggregate Net Investment, in each case until reduced to zero.
Section 4.08. Collection Account.
(a) On or prior to the Closing Date, the Seller shall establish an
account with the Agent in the name of the Agent for the benefit of the Agent and
the Purchasers (the "Collection Account") which account, together with all
monies on deposit therein and investments thereof, shall be under the exclusive
dominion and control of the Agent (for the benefit of the Purchasers). Monies
shall be deposited in the Collection Account from time to time as described in
Sections 4.04 and 4.09. Neither the Seller nor the Master Servicer shall have
any right to make withdrawals or distributions from the Collection Account nor
shall any additional amounts be deposited to or commingled with amounts in the
Collection Account except as provided in Section 4.04, 4.05 and this Section.
(b) On any Settlement Date which is the last day of a Payment Period,
if a Notice Date shall not have occurred and if any amounts have been deposited
to the Collection Account pursuant to Section 4.04 which have not yet been
disbursed to the Agent ("Section 4.04 Deposits"), the Agent shall withdraw such
monies, to the extent that such monies, together with all amounts payable under
Section 4.03 (a) (ii) on such date, do not exceed the sum of (i) the amount of
all then Maturing Tranches for which the Earned Yield is calculated in respect
of the LIBOR Rate and (ii) the amount of all Tranches (whether Maturing Tranches
or not) for which the Earned Yield is calculated in respect of the Reference
Rate. Section 4.04 Deposits withdrawn by the Agent hereunder shall be applied as
if they had been received in payment from the Seller on the date withdrawn
pursuant to Section 4.03(a)(ii).
(c) If a Notice Date shall have occurred and the Agent has delivered
notice to the Seller that all Collections should thereafter be deposited through
the Lock Box Network, the Master Servicer shall cause to be deposited into the
Collection Account (i) all Collections received by it or a Subservicer within
two Business Days of receipt and (ii) all monies on deposit in the Lock Box
Accounts and any New Lock Box Accounts on the Business Day immediately preceding
the last day of each Collection Period and on
-35-
<PAGE> 41
each other Business Day or Business Days during each Collection Period as
selected by the Agent (acting upon instructions of the Required Purchasers). On
the related Settlement Date, such monies will be applied in the same manner and
to the same extent as the Seller would otherwise be obligated to pay and apply
pursuant to Section 4.03(b). The balance of the amounts on deposit in the
Collection Account, if any, shall be applied against accrued but unpaid
obligations and after such unpaid Obligations are satisfied, delivered to the
Seller on such Settlement Date.
(d) The Agent shall invest and reinvest monies on deposit in the
Collection Account in short-term, high-quality investments acceptable to the
Agent pursuant to instructions given by the Seller; provided, that (i) the Agent
and the Purchasers shall not be liable in any manner for any reason for any loss
of or on account of such investments and (i) the Agent shall at all times be a
pledgee in possession of such investments. Interest accruing on and income
earned in respect of amounts and investments in the Collection Account shall be
retained in the Collection Account and shall be applied against accrued but
unpaid Obligations and after such unpaid Obligations are satisfied, delivered to
the Seller on each Settlement Date. The Seller agrees that all income earned on
amounts in the Collection Account shall be earned by the Seller and reported on
its tax returns. To the extent that the Agent is otherwise liable for the
payment of any Taxes in respect of monies on deposit from time to time in the
Collection Account, the Seller shall indemnify the Agent in respect thereof and
shall promptly reimburse the Agent for any such Taxes paid.
Section 4.09. Lock Boxes. After a Termination Event has occurred and
the Agent has delivered notice to the Seller and the Master Servicer that all
Collections should thereafter be deposited through the Lock Box Network, the
Seller shall instruct or otherwise cause all Obligors to make all payments under
the Receivables directly to a Lock Box and shall instruct the applicable Lock
Box Bank to deposit all cash, checks and drafts received therein directly to a
Lock Box Account. The Seller shall not add any bank as a Lock Box Bank, any post
office or bank box as a Lock Box, or any account as a Lock Box Account
(including, without limitation, the addition of any such Lock Box Bank, Lock Box
or Lock Box Account in connection with the establishment of a Lock Box Network)
unless (a) the Agent shall have received five days' prior written notice of such
addition, (b) the Agent shall have received a copy of any new Lock Box Agreement
and (c) the Agent shall have received undated executed copies of Lock Box
Notices to each Lock Box Bank for each Lock Box and Lock Box Account. The Seller
shall not terminate any bank as a Lock Box Bank, terminate any post office or
bank box as a Lock Box, or terminate any account as a Lock Box Account unless
the Agent shall have received 15 days' prior written notice of such termination.
After the occurrence of a Termination Event, and after the Agent has delivered
notice to the Seller that all Collections should thereafter be deposited through
the Lock Box Network, (i) upon receipt of notice from the Agent, the Seller
shall instruct the
-36-
<PAGE> 42
Lock Box Banks to segregate all Collections from all other collections received
in such Lock Box and to deposit such Collections into an account designated by
the Agent, (ii) the Agent is hereby authorized, whether or not it is then
servicing as Collection Agent, to date and deliver to the Lock Box Banks, the
Lock Box Notices delivered to the Agent hereunder and (iii) upon the receipt of
notice from the Agent, the Seller shall (A) establish and maintain at its
expense new Lock Boxes (the "New Lock Boxes") into which only Collections will
be received, (B) open new Lock Box Accounts (the "New Lock Box Accounts") into
which only Collections on or in respect of the Assigned Collateral will be
deposited and (C) notify the Obligors that all future payments by such Obligors
under the Leases are to be made to such new Lock Boxes. The Seller hereby agrees
that the Agent (for the benefit of the Purchasers) shall have the exclusive
ownership and control of the New Lock Boxes and the New Lock Box Accounts, and
shall take any further action, including, without limitation, executing
additional Lock Box Notices, to transfer or establish such control. In case any
authorized signatory of the Seller whose signature shall appear on any Lock Box
Notice shall cease to have such authority before the delivery of such Lock Box
Notice, such signature shall nevertheless be valid and sufficient for all
purposes as if such authority had remained in force at the time of such
delivery. Monies on deposit in the Lock Box Accounts and any New Lock Box
Accounts will be withdrawn therefrom and deposited into the Collection Account
pursuant to Section 4.08(c).
ARTICLE FIVE
FEES AND OTHER PAYMENTS
Section 5.01. Fees. The Seller shall pay, pursuant to Section 4. 06 (b)
, to the Agent the following amounts: (i) on each Settlement Date and on the
Commitment Termination Date, the Commitment Fee, (ii) on the Closing Date, the
Upfront Fee and (iii) on each day specified in the Fee Letter, the related fees
and expenses specified therein.
Section 5.02. Termination Event Rate Payments. The Seller or the Master
Servicer, as the case may be, shall pay to the Agent (for the benefit of the
Agent and the Purchasers, as the case may be) interest on all Obligations not
paid when due under any Facility Document at the Termination Event Rate which
interest shall be payable on demand.
Section 5.03. Payments.
(a) All payments of the Commitment Fees and the Upfront Fee (including
interest thereon accruing under Section 5.02), all payments of Earned Yield and
all amounts paid to the Agent for the repayment of the Purchasers' Investment
shall be made for the ratable account of the Purchasers.
-37-
<PAGE> 43
(b) All amounts to be paid to the Agent by the Seller or the Master
Servicer under any Facility Document shall be paid to the Agent at its
Commercial Loan Service Center, Seattle, Washington or deposited to the
Collection Account in accordance with the terms hereof no later than 11:00 a.m.,
Seattle time, on the day when due in immediately available funds payable in
Dollars.
(c) If any Purchaser shall obtain any payment or other recovery
(whether voluntary, involuntary, by application of or forbearance to exercise,
set off or otherwise) on account of the Aggregate Net Investment, Earned Yield
or otherwise (other than pursuant to Sections 3.05 and 3.06) in excess of such
Purchaser's Pro Rata Share of payments then or therewith obtained by all
Purchasers, such Purchaser shall purchase from the other Purchasers such
participations in the interests held by them as shall be necessary to cause such
purchasing Purchaser to share the excess payment or other recovery ratably with
each of them; provided, however, that if all or any portion of the excess
payment or other recovery is thereafter recovered from such purchasing
Purchaser, the purchase shall be rescinded and each Purchaser that has sold a
participation to the purchasing Purchaser shall repay to the purchasing
Purchaser the purchase price (without interest) to the ratable extent of such
recovery. The Seller agrees that any Purchaser so purchasing a participation
from another Purchaser pursuant to this clause may, to the fullest extent
permitted by law, exercise all its rights of set off with respect to such
participation as fully as if such Purchaser were the direct Purchaser from the
Seller in the amount of such participation. If under any applicable bankruptcy,
insolvency or other similar law, any Purchaser receives a secured claim in lieu
of a set off to which this clause would apply, such Purchaser shall, to the
extent practicable, exercise its rights in respect of such secured claim and
share the benefits thereof in such a manner that the remaining Purchasers will
receive the same benefits as they would otherwise have been entitled to receive
under this clause if a set off had been permitted.
(d) When any payment made pursuant to this Agreement is due on a day
that is not a Business Day, such payment shall be made on the immediately
succeeding Business Day, and such extension of time shall be included in the
computation of interest or fees, as the case may be.
ARTICLE SIX
CONDITIONS OF PURCHASES
Section 6.01. Conditions to Initial Purchase. The obligation of each
Purchaser to make the initial Purchase hereunder on the Closing Date is subject
to the satisfaction of the conditions specified in Section 6.02 and to the
delivery to the Agent of the following:
-38-
<PAGE> 44
(a) certified copies of the articles of incorporation and by-laws of
each of JELD-WEN, the Seller and TRI and certified copies of resolutions adopted
by each of their respective Boards of Directors authorizing the execution,
delivery and performance of the Facility Documents to which such entity is a
party, together with evidence of the authority and specimen signatures of the
individuals who signed this Agreement and the other Facility Documents on behalf
of such entity;
(b) the partnership agreement of Eagle Crest and all amendments
thereto, certified by the general partner of Eagle Crest, together with such
documents authorizing the execution, delivery and performance of the Facility
Documents to which Eagle Crest is a party, together with evidence of the
authority and specimen signatures of the persons signed the Facility Documents
to which Eagle Crest is a party;
(c) certified copies of the articles of incorporation and by-laws of
WorldMark;
(d) a written search report from a Person satisfactory to the Agent
listing all effective financing statements that name the Seller or either of the
originators as "debtor" or "assignor" covering the States of Nevada and Oregon
and such other jurisdictions as the Agent may require, together with copies of
such financing statements; and no such financing statements shall cover any
portion of the Assigned Collateral;
(e) copies of all financing statements on Form UCC-3, with evidence of
filing thereon, releasing the interest of any Person in the Assigned Collateral;
(f) evidence satisfactory to the Agent that the assignment of the
Undivided Interests and the grant of a security interest in the Assigned
Collateral has been duly perfected by the filing of all such UCC financing
statements and the taking of all such other or additional acts as may be
necessary, or in the Agent's opinion, desirable to perfect the ownership
interests of the Purchasers in the Undivided Interests and security interest in
the Assigned Collateral in all jurisdictions, including in the case of the
Mortgage Loan Receivables, the recorded Mortgage Notes, Mortgages and
assignments required pursuant to Section 2.05;
(g) all fees payable to the Agent on or prior to the Closing Date
pursuant to Section 5.01;
(h) the opinions of counsel to the Seller, special Nevada counsel to
the Seller and special Washington counsel to the Seller, each dated the Closing
Date and addressed to the Agent and the Purchasers, substantially in the forms
attached hereto as Exhibits G, G-1 and G-2, respectively;
(i) the opinions of counsel to TRI, special California counsel
to TRI and special Washington counsel to TRI, each dated the
-39-
<PAGE> 45
Closing Date and addressed to the Agent and the Purchasers, substantially in the
forms attached hereto as Exhibits H, H-1 and H-2, respectively;
(j) the opinion of counsel to Eagle Crest, dated the Closing Date and
addressed to the Agent and the Purchasers, substantially in the form attached
hereto as Exhibit I;
(k) the opinions of counsel to JELD-WEN and special Washington counsel
to JELD-WEN, each dated the Closing Date and addressed to the Agent and the
Purchasers, substantially in the forms attached hereto as Exhibits J and G-1,
respectively;
(l) TRENDWEST, inc. shall have been merged with and into JELD-WEN, and
the banks to the JELD-WEN Agreement required to give consent to such merger have
consented to such merger; and
(m) such other documents, certificates and opinions as the Agent or
any Purchaser may reasonably request.
Section 6.02. Conditions to All Purchases. The obligation of each
Purchaser to make any Purchase hereunder (including the initial Purchase) is
subject to the satisfaction of the conditions set forth in Section 2.01 and the
fulfillment of the following further conditions precedent:
(a) a Commitment Termination Date shall not have occurred;
(b) except in the case of a Reinvestment, the Agent shall have
received a duly executed Purchase Notice;
(c) except in the case of a Reinvestment, the Agent shall have
received a certificate from the Master Servicer substantially in the
form attached hereto as Exhibit B hereto (a "Purchase Certificate") one
Business Day prior to the date of such proposed Purchase containing a
calculation of (i) the Net Pool Balance, (ii) the amount of Section
4.04 Deposits which have not yet been disbursed to the Agent pursuant
to Section 4.08(b) and (iii) the Aggregate Net Investment (after giving
effect, on a pro forma basis, to such proposed Purchase);
(d) except in the case of a Reinvestment, the Agent shall have
received an Officer's Certificate of the Seller to the effect that (i)
the representations and warranties of the Seller contained in this
Agreement, any other Facility Document or in any certificates delivered
to the Agent or any Purchaser by or on behalf of the Seller in
connection with such Purchase are true and correct on and as of the
date of such Purchase, with the same force and effect as though made on
and as of such day, and (ii) to the best of the knowledge and
information of such officer, no event has occurred and is continuing,
or would result from such Purchase, that
-40-
<PAGE> 46
constitutes or would constitute an Unmatured Termination Event or
Termination Event; and
(e) the Agent and the Purchasers have received such other
documents, certificates and opinions as the Agent or any Purchaser may
reasonably request.
ARTICLE SEVEN
REPRESENTATIONS AND WARRANTIES
Section 7.01. Representations and Warranties as to the Seller. The
Seller shall make the following representations and warranties on which the
Agent shall rely in accepting the Receivables on behalf of itself and the
Purchasers and on which the Agent and the Purchasers may rely in making
Purchases. The representations and warranties shall speak as of the date of
execution and delivery of this Agreement, each Transfer Date and on each date on
which a Purchase is made, but in each case shall survive the repayment in full
of all Purchases and Obligations and the termination of this Agreement.
(a) Organization and Good Standing. The Seller shall have been
duly organized and shall be validly existing as a corporation in good
standing under the laws of the State of Nevada, with power and
authority to own its properties and to conduct its business as such
properties shall be currently owned and such business is presently
conducted, and had at all relevant times, and shall now have, power,
authority and legal right to acquire, own and sell the Receivables.
(b) Due Qualification. The Seller shall be duly qualified to do
business as a foreign corporation in good standing, and shall have
obtained all necessary licenses and approvals in all jurisdictions in
which the ownership or lease of property or the conduct of its business
shall require such qualifications, except where the failure to so
qualify or to have obtained such licenses and approvals would not have
a material adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the Seller.
(c) Power and Authority. The Seller shall have the power and
authority to execute, deliver and perform its obligations under the
Agreement and each other Facility Document to which it is a party and
to carry out their respective terms; the Seller shall have full power
and authority to sell the Receivables to be sold to the Purchasers and
shall have duly authorized such sale by all necessary corporate action;
and the execution, delivery and performance of this Agreement and each
other Facility Document to which it is a party shall have been duly
authorized by the Seller by all necessary corporate action.
-41-
<PAGE> 47
(d) Licenses. The Seller holds, and at all times during the term
of this Agreement will hold, all material licenses, certificates,
franchises and permits from all Governmental Authorities necessary for
the conduct of its business and has received no notice of proceedings
relating to the revocation of any such license, certificate, franchise
or permit, which singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would materially and adversely
affect its ability to perform its obligations under this Agreement or
any other Facility Document to which it is a party or the validity or
enforceability of any of the Receivables.
(e) Valid Sale; Binding Obligations. This Agreement shall evidence
a valid sale, transfer and assignment of Receivables having an
aggregate Outstanding Principal Balance up to but not exceeding the
Commitment Amount, enforceable against creditors of and purchasers from
the Seller; and shall constitute a legal, valid and binding obligation
of the Seller, enforceable against the Seller in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the
enforcement of creditors' rights in general and by general principles
of equity.
(f) No Violation. The consummation of the transactions
contemplated by, and the fulfillment of the terms of this Agreement and
the other Facility Documents to which the Seller is a party shall not
conflict with, result in any breach of any of the terms and provisions
of, nor constitute (with or without notice or lapse of time) a default
under, the articles of incorporation or bylaws of the Seller, or
conflict with or violate any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under,
any material indenture, agreement or other instrument to which the
Seller is a party or by which it shall be bound; nor, except as
otherwise provided in this Agreement, result in the creation or
imposition of any Lien upon any of its properties pursuant to the terms
of any such indenture, agreement or other instrument; nor violate any
law or, to the best of the Seller's knowledge, any order, rule or
regulation applicable to the Seller of any court or of any federal or
state regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties;
which breach, default, conflict, Lien or violation would have a
material adverse effect on the condition, financial or otherwise, or on
the earnings, business affairs or business prospects of the Seller.
(g) No Proceedings. There are no proceedings or investigations
pending, or to the best knowledge of the Seller, threatened, before any
court, regulatory body, administrative agency or other Governmental
Authority having jurisdiction over the Seller or its properties: (i)
asserting
-42-
<PAGE> 48
the invalidity of this Agreement or any other Facility Document to
which the Seller is a party, (ii) seeking to prevent the consummation
of any of the transactions contemplated by the Facility Documents to
which the Seller is a party or (iii) seeking any determination or
ruling that might materially and adversely affect the performance by
the Seller of its obligations under, or the validity or enforceability
of, such Facility Agreement.
(h) Government Approvals. No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority
is required for the due execution, delivery and performance by the
Seller of this Agreement and the other Facility Documents to which it
is a party or in connection with the transactions contemplated hereby
or thereby, except such as have been obtained prior to the date of this
Agreement and are in full force and effect.
(i) Margin and Other Regulations. No use of any funds acquired by
the Seller under this Agreement will conflict with or contravene any of
the Federal Reserve Regulations including, without limitation, Federal
Reserve Regulations G, T, U and X.
(j) Taxes. The Seller has filed all tax returns and reports
required of it and has paid all Taxes which are due and payable and has
provided adequate reserves for payment of any Tax whose payment is
being contested and there are no material questions or disputes between
the Seller and any Governmental Authority with respect to any Taxes.
(k) Investment Company Act. The Seller is not required to be
registered as an "investment company" under in the Investment Company
Act.
(l) Capital Stock. All of the issued and outstanding capital stock
of the Seller has been duly authorized, validly issued and is fully
paid and non-assessable, free and clear of Liens; until any of such
stock has been sold or otherwise disposed of pursuant to Section
9.01(b), 50% of such stock is owned by I&I Holdings with the remaining
shares of capital stock being owned by Composer.
(m) Associations; WorldMark. Each Association and WorldMark shall
have been duly organized and shall be validly existing as a corporation
in good standing under the laws of the state of its incorporation; no
practice, procedure or policy employed by the Association or WorldMark
violates any law, regulation or agreement which, if enforced, could be
reasonably expected to have a material adverse effect on the condition,
financial or otherwise, on the earnings, business affairs or business
prospects of the Association or WorldMark, as the case may be, or
constitute grounds for the revocation
-43-
<PAGE> 49
of any license, charter or permit that is material to its conduct of
business.
Section 7.02. Representations and Warranties as to the Receivables. The
Seller shall make the following representations and warranties as to the
Receivables on which the Agent shall rely in accepting the Receivables on behalf
of itself and the other Purchasers and on which the Agent and the Purchasers may
rely in making Purchases. Except as otherwise provided herein, such
representations and warranties shall speak as of the Transfer Date relating to
each such Receivable, and on each date on which a Purchase is made pursuant to
this Agreement, but in each case shall survive the repayment in full of all
Purchases and Obligations and the termination of this Agreement.
(a) Origination; General Terms and Form. Each Receivable (i) shall
have been originated in the United States by an Originator in the
ordinary course of its business and in accordance with its customary
underwriting and origination criteria, shall have been fully and
properly executed by the parties thereto and shall have been acquired
by the Seller from an Originator pursuant to the related Purchase
Agreement; (ii) shall be assignable, and shall be so assigned, by the
Seller to the Agent; (iii) shall, except as otherwise provided in this
Agreement, provide for level payments of Monthly P&I (provided that (A)
the payment in the first or last month in the life of the Receivable
may be minimally different from the level payment) that fully amortizes
its Original Principal Balance by maturity and provides for a fixed
finance charge or yields a fixed rate of interest at its Receivable
Interest Rate; (iv) shall provide for, in the event that it is prepaid,
a prepayment that fully pays such related Original Principal Balance
and includes accrued but unpaid interest at least through the date of
prepayment in an amount calculated by using an interest rate at least
equal to its Receivable Interest Rate; (v) shall have had a down
payment made by the related obligor in an amount at least equal to 10%
of such Original Principal Balance; (vi) shall be payable in Dollars;
(vii) shall have an original scheduled term of seven years or less if a
Right to Use Receivable or ten years or less if a Mortgage Loan
Receivable; and (viii) shall be substantially in one of the forms
attached hereto as Exhibits C or D.
(b) Compliance with Consumer Protection Laws. Each Receivable
shall have complied at the time it was originated, and shall comply at
the time of making of such repayment and warranty in all material
respects with all requirements of applicable federal, state and local
laws, and regulations thereunder, including usury and consumer
protection laws.
(c) One Original; Enforceability. There is only one original of
each Receivable (and, if such Receivable is a Mortgage Loan Receivable,
one original of the related Mortgage Note and Mortgage) and such
Receivable (and, if such
-44-
<PAGE> 50
Receivable is a Mortgage Loan Receivable, the related Mortgage Note)
shall constitute the genuine, legal, valid and binding payment
obligation in writing of the related Obligor, enforceable by the holder
thereof in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation and
other similar laws affecting the enforcement of creditors' rights in
general and by general principles of equity.
(d) United States Obligors; No Bankrupt or Governmental
Obligors. To the best knowledge of the Seller, the Obligor is a citizen
or resident of, and making payments from, the "United States" (as such
term is defined in Section 7701(a) (9) of the Code) and the Receivable
is not due from (i) an Obligor who is currently the subject of a
bankruptcy proceeding or is bankrupt or insolvent or (ii) the United
States, any state thereof or any local government or municipality
therein or from any agency, department or instrumentality of the United
States, any state thereof or any local government or municipality
therein.
(e) Employee Obligors. Based on the outstanding Principal Balance,
less than 10% of the Receivables comprising the Receivables Pool have
Obligors who are employees of either Originator, the Seller or any of
their respective affiliates.
(f) Modifications. The Receivable has not been satisfied,
subordinated or rescinded and no provision thereof has been waived in
such a manner that it fails to meet all of the other representations
and warranties with respect to such Receivable, and each such amendment
or waiver has been reduced to writing and has been included in the
related Receivable File.
(g) No Setoffs, Breaches or Unmatured Termination Events. No facts
shall be known to the Seller which would give rise to any right of
rescission, setoff, counterclaim or defense, nor shall the same have
been asserted or threatened, with respect to the Receivable; no
default, breach, violation or event permitting acceleration under the
terms of such Receivable shall have occurred as of the related Cutoff
Date or Transfer Date, as the case may be; no continuing condition that
with notice or the lapse of time would constitute a default or event of
default or breach, violation or event permitting acceleration under the
terms of such Receivable shall have arisen; and the Seller shall not
have waived any of the foregoing.
(h) Title to and Security Interest in Receivables. No provision of
such Receivable shall have been waived, except as provided in clause
(f) above; immediately prior to the transfer and assignment of such
Receivable, the Seller had good and marketable title to such Receivable
free and clear of Liens (other than Permitted Encumbrances on the
related
-45-
<PAGE> 51
Mortgaged Property if such Receivable is a Mortgage Loan Receivable and
Liens of WorldMark in the case of Right to Use Receivables) or rights
of others; immediately upon the transfer and assignment thereof, the
Agent for the benefit of the Purchasers, shall have good and marketable
title to such Receivable, free and clear of all Liens (other than
Permitted Encumbrances on the related Mortgaged Property if such
Receivable is a Mortgage Loan Receivable and Liens of WorldMark in the
case of Right to Use Receivables) and rights of others; all filings and
recordings (including UCC filings) necessary in any jurisdiction to
give the Agent a first priority perfected security interest in the
Receivable (and, if such Receivable is a Mortgage Loan Receivable, in
the related Mortgage Note) shall have been made; and the Agent's
security interest in such Receivable (and, if such Receivable is a
Mortgage Loan Receivable, in the related Mortgage Note) is and will be
prior to any Lien (including, without limitation, any Lien of any
homeowners' association or condominium association) on, or other
interests relating to, such Receivable (and, if such Receivable is a
Mortgage Loan Receivable, in the related Mortgage Note) except for (i)
such Liens and claims which have been satisfied or otherwise released
in full as of the related Transfer Date, (ii) Liens for municipal or
other local taxes if such taxes shall not at the time be due and
payable or if the Seller shall currently be contesting the validity of
such taxes in good faith by appropriate proceedings, (iii) if such
Receivable is a Mortgage Loan Receivable, Permitted Encumbrances on the
related Mortgaged Property and (iv) if such Receivable is a Right to
Use Receivable, Liens of WorldMark.
(i) No Adverse Selection. In connection with the transactions
contemplated by this Agreement and the Purchase Agreements, the
Receivables meet the criteria set forth in this Section and no
selection procedures adverse to the interests of the Agent and the
Purchasers were used in connection with such selection.
(j) Schedule of Receivables. The information set forth in the
related Schedule of Receivables with respect to such Receivable shall
be true and correct in all material respects.
Section 7.03. Additional Representations and Warranties as to the
Mortgage Loan Receivables. In addition to the representations and warranties in
Section 7.02, the Seller shall make the following representations and warranties
on which the Agent shall rely in accepting the Receivables that are Mortgage
Loan Receivables on behalf of itself and the Purchasers and on which the Agent
and the Purchasers may rely in making Purchases. The representations and
warranties shall speak as of each Transfer Date and on each date on which a
Purchase is made, but in each case shall survive the repayment in full of all
Purchases and Obligations and the termination of this Agreement.
-46-
<PAGE> 52
(a) Characterization of Interest. The timeshare estate mortgaged
by the related obligor constitutes a fee interest in real property at
Eagle Crest; the related Mortgage has been duly filed and recorded with
all appropriate Governmental Authorities in all jurisdictions in which
such Mortgage is required to be filed and recorded to create a valid,
binding and enforceable first Lien on the related Mortgaged Property
and such Mortgage creates a valid, binding and enforceable first Lien
on such Mortgaged Property; Eagle Crest, to the extent applicable, is
in compliance with all permitted encumbrances respecting the right to
the use of such Mortgaged Property; each of the assignment of such
Mortgage from the Seller to the Agent and each related endorsement of
the Mortgage Note constitutes an endorsement of the Seller, of such
Mortgage and Mortgage Note, and all monies due or to become due
thereunder, and all proceeds thereof; and the execution and delivery of
an Assignment of such Mortgage from the Seller to the Agent (and the
recording thereof in the appropriate jurisdictions), and the
endorsement and delivery of such Mortgage Note by the Seller,
constitute all actions required to be taken by the Seller to fully
perfect the ownership interest of the Agent in such Mortgage and
Mortgage Note.
(b) Title to Mortgaged Property; Disbursement of Receivable
Proceeds. At the related Origination Date, the Obligor had good and
marketable fee simple title to the related Mortgaged Property, free and
clear of all Liens, except for Permitted Encumbrances, and the proceeds
of such Mortgage Loan Receivable have been fully disbursed.
(c) The Mortgages Generally. The related Mortgage contains
customary and enforceable provisions so as to render the rights and
remedies of the holder thereof adequate for the practical realization
against the related Mortgaged Property of the benefits of the security
interests intended to be provided thereby, including by judicial
foreclosure; there is no exemption available to the related obligor
which would interfere with the mortgagee's right to foreclose such
Mortgage, other than that which may be available under applicable
bankruptcy, debt relief or homestead statutes; any applicable
intangibles taxes and documentary sales taxes have been paid; and such
Mortgage gives the mortgagee the right to receive and direct the
application of insurance and condemnation proceeds received in respect
of such Mortgaged Property.
(d) The Mortgage Notes Generally. The related Mortgage Note is not
and has not been secured by any collateral except the Lien of the
related Mortgage; the amount financed by such Mortgage Note did not
include any portion of the related downpayment or homeowners'
association payments; such Mortgage Note does not by its terms provide
for the capitalization of interest or the forbearance of interest; any
applicable
-47-
<PAGE> 53
intangibles taxes and documentary sales taxes have been paid; and such
Mortgage Note evidences a fully amortizing debt obligation which bears
a fixed rate of interest, provides for level monthly payments of
principal and interest and is payable in Dollars.
(e) Forms of Mortgage Notes and Mortgages. The related Mortgage
and Mortgage Note are substantially in one of the forms set forth as
Exhibit D hereto.
(f) No Impairment of Insurance Coverage. The Seller has not taken
(or omitted to take), and has no notice that the related Obligor has
taken (or omitted to take), any action that would impair or invalidate
the coverage provided by any hazard, title or other insurance policy
relating to such Mortgage Loan Receivable or the related Mortgaged
Property.
(g) Assignability of Mortgaged Property. The related Mortgaged
Property is assignable to and by the mortgagee without the consent of
the related Association or any other Person and there are no other
restrictions on resale thereof (other than the obligation to notify
such homeowners' association of any such assignment).
(h) Associations. Eagle Crest manages, through Country Club
Management, Inc., the related Mortgaged Property and performs services,
pursuant to a management agreement between Eagle Crest and the related
Association which is in full force and effect and a copy of which has
been delivered to the Agent; and to the best knowledge of the Seller,
all obligations under such agreement have been performed and there is
no material default under such agreement.
(i) Insurance; Damage to Project. The Project in which the related
Mortgaged Property is located is insured through the related
homeowners' association in the event of fire or other casualty for the
full replacement value thereof, and in the event that such Mortgaged
Property should suffer any loss covered by casualty or other insurance,
upon receipt of any insurance proceeds such homeowners' association is
required, during the time such Mortgaged Property is covered by such
insurance, under its applicable governing instruments either to repair
or rebuild the portions of the project in which such Mortgaged Property
is located or to pay such proceeds to the holder of the related
Mortgage secured by a timeshare estate in the portions of the Project
in which such Mortgaged Property is located; and such Project is not
located in a designated flood plain.
(j) No Amounts Outstanding. There are no delinquent or unpaid
taxes, ground rents, water charges, sewer rents, assessments
outstanding with respect to the related Mortgaged Property, nor any
other material outstanding Liens other than Permitted Encumbrances
affecting such Mortgaged Property that
-48-
<PAGE> 54
would materially affect the interests of the Purchasers in the related
Mortgage Loan Receivable.
(k) No Damage. To the best knowledge of the Seller, the related
Mortgaged Property and the Project in which such Mortgaged Property is
located is in good repair and condition, excepting ordinary wear and
tear, and waste and there is no proceeding pending or threatened for
the total or partial condemnation or taking of such Mortgaged Property
or any part of such Project by eminent domain.
(l) Recreational Facilities. The portions of the Project in which
the related Mortgaged Property which represents the recreational
facilities are in good repair and condition, ordinary wear and tear
excepted.
(m) No Rights of Partition. Neither the Mortgagor nor any other
Person has the right, by statute, contract or otherwise, to seek the
partition of the Mortgaged Property, except for failed timeshare
provisions under Section 94.775 of the Oregon Revised Statutes.
(n) Compliance with Laws. The Project in which the related
Mortgaged Property is located is in compliance with any applicable
zoning, building or environmental law or regulation and all
inspections, licenses, special use permits and certificates required,
whether by law, regulation or insurance standards to be made or issued
with respect to the Project and with respect to the use and occupancy
of the same for the purpose for which it is currently used, including
but not limited to certificates of occupancy and fire underwriting
certificates, have been made or issued by the appropriate governmental,
quasi-governmental or other authorities; neither the Seller nor Eagle
Crest has received notice of any outstanding violations (i) of the
Department of Environmental Quality Water Pollution Control Facility
permit, (ii) with respect to the operation of the septic tank system or
(iii) of any material legal requirement with respect to the use and
occupancy of the Project; neither the Seller nor Eagle Crest has
received notice from the Department of Environmental Quality Central
Region office, Deschutes County agencies or any other governmental
agency of any spills or releases of, or the presence of, hazardous
substances on the Project and neither the Seller nor Eagle Crest has
knowledge of any such hazardous substances; and the Project has been
completed within the meaning of any applicable state statute.
(o) Compliance as to Environmental Matters. The Project in which
the related Mortgaged Property is located is in compliance with all
environmental laws, ordinances, rules, regulations and orders of
federal and state governmental authorities relating thereto; the
Project is not now and has never been used to generate, manufacture,
refine, transport, treat, store, handle, dispose, transfer, produce,
process or
-49-
<PAGE> 55
in any manner deal with gasoline, petroleum products, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous
or toxic substances, polychlorinated biphenyls or related or similar
materials, asbestos or any material containing asbestos, or any other
substance or material as may be defined as a hazardous or toxic
substance by any Federal, state or local environmental law, ordinance,
rule or regulation which might reasonably be expected to have a
material adverse impact on the Project or constitute grounds for the
revocation of any license, charter, permit or registration which is
material to the continued operation of the Project.
Section 7.04. Repurchase Upon Breach; Optional Repurchase.
(a) Each of the parties hereto shall inform the other parties promptly,
in writing, upon the discovery of any breach of the Seller's representations and
warranties pursuant to Sections 7.02 or 7.03 which materially and adversely
affects any Receivable. Unless the breach shall have been cured in all material
respects by the 60th day following its discovery, the Seller shall repurchase
such Receivable. Additionally, in the case of Mortgage Loan Receivables, if the
Seller does not deliver to the Agent within 90 days after the related Transfer
Date either an opinion of counsel pursuant to Section 2.05(a) (iv) or a recorded
assignment of mortgage with evidence of recording thereon to or upon the order
of the Agent, the Seller shall repurchase the related Mortgage Loan Receivable.
If necessary, the Seller shall enforce the obligation of the related originator
under the related Purchase Agreement to repurchase any such Receivable required
to be repurchased as described above. In consideration of the purchase of any
such Receivable, the Seller shall remit an amount equal to the Purchase Amount
to the Master Servicer. The sole remedy of the Agent, acting on behalf of the
Purchasers, with respect to a breach of the foregoing representations and
warranties which materially and adversely affects any Receivable shall be to
require the Seller to repurchase Receivables pursuant to this Section and to
enforce the related Originator's obligation to the Seller to repurchase such
Receivable pursuant to the related Purchase Agreement.
(b) In connection with any transfer of ownership of a Mortgaged
Property by the related Obligor, the Seller may, if the Master Servicer is
required to enforce a due-on-sale clause contained in the related Mortgage Note,
in its discretion, repurchase the related Mortgage Loan Receivable in order to
avoid the required enforcement of such due-on-sale clause. In consideration of
the purchase of any such Mortgage Loan Receivable, the Seller shall remit an
amount equal to the Purchase Price to the Master Servicer.
(c) Upon the payment by the Seller of the Purchase Price for any
Receivable repurchased pursuant to Section 7. 04 (a) or 7. 04 (b) , the Agent
shall deliver to the Seller such instruments as may be necessary to assign and
transfer, without recourse or warranty
-50-
<PAGE> 56
of any kind, such Receivable and the Related Security and Receivable Documents.
Section 7.05. Representations and Warranties as a Whole. This
Agreement, the other Facility Documents and all other instruments, documents,
certificates and statements furnished to the Agent or any Purchaser by the
Seller or on the Seller's behalf pursuant to the Facility Documents, taken as a
whole, do not contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained herein or
therein not misleading.
ARTICLE EIGHT
AFFIRMATIVE COVENANTS
Section 8.01. Affirmative Covenants of the Seller. From the date hereof
until the first day following the Commitment Termination Date on which (i) the
Aggregate Undivided Interest shall be reduced to zero and (ii) all Obligations
shall have been finally paid and performed, the Seller shall do all of the
following unless the Agent (acting upon the direction of the Required
Purchasers) shall otherwise consent in writing:
(a) The Seller shall comply with all applicable laws, rules,
regulations and orders that are material to it, including but not
limited to all applicable laws, rules, regulations and orders with
respect to the Assigned Collateral and will take all actions necessary
to ensure that all Taxes, pension obligations and other governmental
claims in respect of its operations, business and assets are properly
paid when due.
(b) The Seller shall preserve and maintain its corporate
existence, rights, franchises and privileges in the State of Nevada,
and qualify and remain qualified in good standing as a foreign
corporation in each State where such qualification is necessary or
advisable in view of its operations, business and assets.
(c) From time to time during regular business hours, after receipt
of at least three days' prior notice from the Agent or the related
Purchaser, the Seller shall permit the Agent, any Purchaser and their
respective agents and representatives (i) to examine and make copies of
and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in the possession or under the
control of the Seller and (ii) to visit the offices and properties of
the Seller for the purpose of examining such materials and to discuss
matters relating to the Receivables, its performance under any Facility
Document or its affairs, finances and accounts generally with any of
its officers, directors or employees.
-51-
<PAGE> 57
(d) The Seller shall maintain and implement or cause to be
maintained and implemented administrative and operating procedures
(including, without limitation, an ability to recreate records
evidencing the Receivables and the Receivable Documents in the event of
the destruction of the originals thereof), and keep and maintain or
cause to be kept and maintained (i) all documents, books, records and
other information reasonably necessary or advisable for the collection
of the Receivables (including, without limitation, records adequate to
permit the daily identification of each new receivable and all
Collections of and adjustments to each existing Receivable) and (ii)
adequate records and books of account in which complete entries will be
made in accordance with generally accepted accounting principles,
consistently applied, reflecting all financial transactions of the
Seller.
(e) The Seller shall (i) keep its principal place of business and
its chief executive office at the address set forth in Section 15.05
unless it shall have provided 60 days' prior written notice of any
intended move to the Agent, (ii) maintain a fiscal year ending on
December 31 and shall not make any significant change in accounting
policies or reporting practices other than changes required by
generally accepted accounting principles or otherwise required by law
and (iii) comply in all material respects with the Credit and
Collection Policy in connection with each Receivable, and each
Receivable Document related thereto.
(f) The Seller will deliver to the Agent (i) as soon as reasonably
possible and in any event within 60 days after the close of each fiscal
quarter (90 days after the close of the fourth quarter), its in-house
prepared (A) balance sheet as at the end of such fiscal quarter setting
forth in comparative form the corresponding figures as at the end of
the preceding fiscal quarter, and (B) the statement of income, for such
fiscal quarter setting forth in comparative form the corresponding
figures for the previous fiscal quarter, with transactions and account
balances accounted for in conformity with generally accepted accounting
principles applied on a basis consistent with that of the preceding
quarter or containing disclosure of the effect on financial position or
results of operations of any change in the application of accounting
principles during the quarter, together with an officer's Certificate
certifying as to such financial statements and that the signer thereof
has obtained no knowledge of any Unmatured Termination Event or
Termination Event; (ii) as soon as reasonably possible and in any event
within 120 days after the close of each fiscal year, the consolidated
(A) balance sheet of the Seller, as at the end of such fiscal year
setting forth in comparative form the corresponding figures at the end
of the preceding fiscal year, and (B) statements of income, retained
earnings and changes in financial position for such fiscal year of the
Seller setting forth in comparative form the corresponding figures for
the
-52-
<PAGE> 58
previous fiscal year, prepared in conformity with generally accepted
accounting principles applied on a basis consistent with that of the
preceding year or containing disclosure of the effect on financial
position or results of operations of any change in the application of
accounting principles during the year which consolidated balance sheet
and income statements shall be accompanied by an unqualified report and
opinion of independent public accountants of recognized standing
approved by the Agent, which report and opinion shall be in accordance
with generally accepted auditing standards relating to reporting or, if
qualified, the opinion shall not be qualified due to any limitation in
scope of the examination or due to any departure from any generally
accepted accounting principles, and shall be accompanied by a statement
of such accountants that, in making the audit necessary for the
certification of such financial statements and such report, such
accountants have obtained no knowledge of any Unmatured Termination
Event or Termination Event or under any other evidence of indebtedness
or, if in the opinion of such accountants any such Unmatured
Termination Event or Termination Event shall have occurred and be
continuing, shall include a statement as to the nature and status
thereof; and (iii) such other information as the Agent or any Purchaser
may reasonably request.
(g) Promptly after learning thereof, the Seller will notify the
Agent of (i) the details of any action, proceeding, investigation or
claim against or affecting the Seller instituted before any court,
arbitrator or Governmental Authority or, to the Seller's knowledge
threatened to be instituted, which, if determined adversely would be
likely to have a material adverse effect on (A) the performance by the
Seller, any of TRI, Eagle Crest or the Master Servicer of their
respective obligations under any Facility Document, (B) the validity or
enforceability of any Facility Document, (C) the validity or
enforceability of any Receivable (or any Receivable Document related
thereto), (D) the Purchaser, first priority security interest in the
Assigned Collateral or (E) the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the Seller,
TRI, Eagle Crest, WorldMark or the Master Servicer and (ii) the
occurrence of any Unmatured Termination Event or Termination Event.
(h) From time to time, the Seller will (i) pay or reimburse the
Agent for all expenses, including legal fees, incurred by the Agent in
connection with the preparation of this Agreement and the other
Facility Documents, the making of any Purchase, and the perfection of
the Purchasers, interests in the Assigned Collateral; (ii) obtain and
promptly furnish to the Agent evidence of all such government approvals
as may be required to enable the Seller to comply with its obligations
under the Facility Documents; (iii) execute and deliver all such
instruments (such as UCC continuation
-53-
<PAGE> 59
statements) and perform all such other acts as may be necessary to
maintain the Purchasers, interests continuously perfected as a first
priority interest in the Assigned Collateral; (iv) execute and deliver
all such other instruments and perform all such other acts as the Agent
or any Purchaser may reasonably request to carry out the transactions
contemplated by this Agreement and the other Facility Documents; and
(v) comply in all material respects with the Seller's obligations under
the Facility Documents and not take any action which would permit or
cause the Seller, the Master Servicer or any Subservicer to have the
right to refuse to perform any of their respective obligations under
any Facility Documents.
(i) The purpose of the Seller shall be limited to the following
purposes, and activities incident to and necessary or convenient to
accomplish the following purposes: (i) to acquire, own, hold, sell,
transfer, assign, pledge, finance, refinance and otherwise deal with,
timeshare receivables similar to the Receivables; (ii) to authorize,
issue, sell and deliver one or more series of obligations, consisting
of one or more classes of certificates that are collateralized by or
evidence an interest in such timeshare receivables or to engage in
transactions similar to the transactions contemplated by this
Agreement; and (iii) to negotiate, authorize, execute, deliver and
assume the obligations or any agreement relating to the activities set
forth in clauses (i) and (ii) above, including but not limited to any
pooling and servicing agreement, indenture, reimbursement agreement,
credit support agreement, receivables purchase agreement, receivables
transfer agreement or private placement agreement or to engage in any
lawful activity which is incidental to the activities contemplated by
any such agreement.
(j) The Seller will deliver to the Agent copies of the annual
financial statements of each Association and WorldMark within 120 days
of each fiscal year end.
(k) The Seller will within ten Business Days following an Interest
Rate Cap Date obtain Interest Rate Protection.
Section 8.02. Affirmative Covenants of JELD-WEN. From the date hereof
until the first day following the Commitment Termination Date on which (i) the
Aggregate Undivided Interest shall be reduced to zero and (ii) all Obligations
shall have been fully paid and performed, JELD-WEN shall, unless the Agent
(acting upon the direction of the Required Purchasers) shall otherwise consent
in writing, notify the Agent if JELD-WEN or any of its Subsidiaries allows their
respective obligations under ERISA to become delinquent.
-54-
<PAGE> 60
ARTICLE NINE
NEGATIVE COVENANTS
Section 9.01. Negative Covenants of the Seller. From the date hereof
until the first day following the Commitment Termination Date on which (i) the
Aggregate Undivided Interest shall be reduced to zero and (ii) all obligations
shall have been finally paid and performed, unless the Agent (acting upon the
direction of the Required Purchasers) shall otherwise consent in writing:
(a) The Seller shall not, except as otherwise provided herein,
(i) sell, transfer, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Lien upon or
with respect to any Assigned Collateral (other than Permitted
Encumbrances on the Mortgaged Properties in the case of Mortgage Loan
Receivables and Liens of WorldMark in the case of Right to Use
Receivables) or any other property now owned or hereafter acquired by
the Seller (other than Liens arising by operation of law or arising in
connection with court proceedings), except that the Seller can sell,
assign or otherwise dispose of the 1,250,000 shares of Grossman's, Inc.
common stock owned by the Seller on the Closing Date, (ii) assign any
right to receive any income or proceeds in respect thereof or (iii)
create, incur, assume or cause to exist any indebtedness, whether
current or funded, or any liability other than (A) liabilities payable
to the Purchasers or the Originators with respect to the Subordinated
Notes, (B) liabilities for services supplied or furnished to the Seller
including, but not limited to, the reasonable fees of accountants,
attorneys or other professionals required by the Seller for the normal
operation of its business, and (C) liabilities payable to JELD-WEN in
respect of items described in clause (B) above, payments in respect of
which shall be subordinated to amounts owed by the Seller under this
Agreement.
(b) The Seller shall not (i) issue any additional shares of
its capital stock to any Person other than JELD-WEN or any affiliate
thereof, (ii) permit the transfer, sale or pledge of any shares of its
outstanding capital stock to any Person other than JELD-WEN or an
affiliate thereof or (iii) amend its articles of incorporation or
bylaws.
(c) Notwithstanding the provisions of clause (b), so long as
no Unmatured Termination Event or Termination Event has occurred and is
continuing, the Seller can (i) on or prior to January 31, 1994, declare
and pay dividends on any class of its capital stock, (ii) after January
31, 1994 pay dividends on its outstanding shares of Class A common
stock so long as the amount of such dividends do not exceed 12% per
annum or $480,000 and (iii) make payments in respect of the
-55-
<PAGE> 61
Subordinated Notes and other liabilities permitted under clause (a)
above.
(d) The Seller shall not (i) engage in any business or
activity other than those permitted by Section 8.01(j) , (ii) make any
material change in the character of its business, enter into a new
business, enter into any material agreement other than as contemplated
by the Facility Documents or (iii) merge or consolidate with any other
corporation, company or entity or sell all or substantially all of its
assets or acquire all or substantially all of the assets or capital
stock or other ownership interest of any other corporation, company or
entity.
(e) The Seller shall not, except as described in clause (c)
(iii) above, (i) make loans to any Person, (A) advance credit or enter
into any agreement whereby the Seller is contingently liable for the
debts of another, (iii) guarantee the indebtedness of other parties or
(iv) make capital expenditures.
(f) The Seller shall not, without the affirmative vote of a
majority of the members of its Board of Directors (which must include
the affirmative vote of all duly appointed Independent Directors) , (i)
dissolve or liquidate, in whole or in part, or institute proceedings to
be adjudicated bankrupt or insolvent, (ii) consent to the institution
of bankruptcy or insolvency proceedings against it, (iii) file a
petition seeking or consent to reorganization or relief under any
applicable federal or state law relating to bankruptcy, (iv) consent to
the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Seller or a substantial
part of its property, (v) make a general assignment for the benefit of
creditors, (vi) admit in writing its inability to pay its debts
generally as they become due or (vii) take any corporate action in
furtherance of the actions set forth in clauses (i) through (vi) above;
provided, however, that no director may be required by any shareholder
of the Seller to consent to the institution of bankruptcy or insolvency
proceedings against the Seller so long as it is solvent.
Section 9.02. Negative Covenants of JELD-WEN. From the date hereof
until the first day following the Commitment Termination Date on which (i) the
Aggregate Undivided Interest shall be reduced to zero and (ii) all Obligations
shall have been finally paid and performed, unless the Agent (acting upon
direction of the Required Purchasers) shall otherwise consent in writing:
(a) JELD-WEN shall not, except as otherwise provided herein,
sell, assign (by operation of law or otherwise) or otherwise dispose
of, or create or suffer to exist any Lien upon or with respect to any
of the capital stock of I&I
-56-
<PAGE> 62
Holdings, its general partnership interest in Eagle Crest or the
capital stock of TRI.
(b) JELD-WEN shall not allow its payment or funding obligations
under ERISA to become delinquent.
(c) JELD-WEN shall not allow either of the originators to (i)
make any material change in the character or conduct of their
respective businesses as they are conducted as of the Closing Date or
enter into any new businesses, (ii) make any change in their respective
corporate or partnership forms or (iii) sell, pledge, assign or
otherwise transfer any shares of stock or limited or general
partnership interests, as the case may be, in their respective
corporation or partnership to any Person other than JELD-WEN or any
affiliate thereof.
ARTICLE TEN
SERVICING, ADMINISTRATION AND COLLECTIONS
Section 10.01. Designation of Master Servicer.
(a) The servicing, administering and collection of the Receivables
shall be conducted by the Master Servicer designated from time to time in
accordance with this Section. Until the Agent (acting upon the direction of the
Required Purchasers) gives notice (the "Successor Notice") to the Seller and the
Master Servicer of the designation of a new Master Servicer, JELD-WEN is hereby
designated as, and hereby agrees to perform the duties and obligations of,
Master Servicer in accordance with the terms of this Agreement. The Agent and
the Purchasers agree not to provide the Seller and the Master Servicer with a
Successor Notice unless(i)a Termination Event shall have occurred and be
continuing or (ii) the Seller or the Master Servicer, as the case may be, shall
fail to perform or observe any term, covenant or agreement contained in Sections
8.01, 8.02, 9.01 or 9.02 or this Article and such failure shall remain
unremedied for five Business Days after written notice thereof shall have been
given to the Seller and the Master Servicer by the Agent.
(b) Upon receipt of a Successor Notice or upon resignation of the
Master Servicer pursuant to Section 10.01(c), the Master Servicer will take such
actions as are necessary to best facilitate the transition of the performance of
the Master Servicer's activities to the new Master Servicer and the Seller and
Master Servicer shall use their best efforts to assist the new Master Servicer
to assume and perform the duties of the Master Servicer hereunder. Without
limiting the foregoing, the Master Servicer agrees that:
(i) the Agent may direct any Obligors to make payment of all
amounts payable under any Receivables directly to the Agent or the new
Master Servicer or through the Lock Box Network;
-57-
<PAGE> 63
(ii) the Master Servicer shall, at the Agent's request and at
the Master Servicer's expense, give notice of the Purchasers' ownership
of the Receivables to each Obligor and direct that payments be made
directly to the Agent or the new Master Servicer or through the Lock
Box Network;
(iii) the Master Servicer shall, at the Agent's request, (A)
assemble all of the documents, instruments and other records
(including, without limitation, computer programs, tapes and disks) in
its possession which evidence the Receivables, the related Receivable
Documents and the Related Security, or which are otherwise necessary or
desirable to collect such Receivables, and shall make the same
available to the Agent or the new Master Servicer at a place selected
by the Agent, (B) segregate all cash, checks and other instruments
received by it from time to time constituting Collections in a manner
acceptable to the Agent and shall, promptly upon receipt, remit all
such cash, checks and instruments, duly indorsed or with duly executed
instruments of transfer, to the Agent, the new Master Servicer or the
Collection Account and (C) permit any successor Master Servicer and its
agents, employees and assignees access to its facilities and its books,
records, documents and instruments (including, without limitation,
computer programs, tapes and disks) related to the Receivables; and
(iv) the Agent or any new Master Servicer is authorized to take
any and all steps in the Seller's name and on behalf of the Seller
necessary or desirable, in the Agent's determination, to collect all
amounts due under the Receivables (including, in the case of the
Mortgage Loan Receivables, amounts due under the related Mortgage
Notes), including, without limitation, indorsing the Seller's name on
checks and other instruments representing Collections and enforcing
such Receivables and the related Receivable Documents.
(c) The Master Servicer's authorization to act as servicer of the
Receivables under this Agreement shall terminate on the first day following the
Commitment Termination Date on which (i) the Aggregate Undivided Interest shall
be reduced to zero and (ii) all Obligations shall have been fully paid and
performed.
(d) The Master Servicer acknowledges that the Agent and the Purchasers
have relied on the Master Servicer's agreement to act as the initial Master
Servicer hereunder in their respective decisions to execute and deliver the
Facility Documents. The Master Servicer agrees not to resign as Master Servicer
and that until any Successor Notice shall have been delivered to the Master
Servicer, the Master Servicer shall continue to perform all of the duties of the
Master Servicer hereunder unless it shall have determined that the performance
of such duties shall no longer be permitted by applicable law.
-58-
<PAGE> 64
Section 10.02. Duties of the Master Servicer; Subservicers.
(a) The Master Servicer, acting alone and/or through one or more
Subservicers as provided in this Section, shall, as agent for the Agent and the
Purchasers, manage, service, administer and make collections on or in respect of
the Receivables. The Master Servicer agrees that its servicing of the
Receivables shall be carried out in accordance with customary and usual
procedures of institutions which service unsecured timeshare receivables and
timeshare receivables secured by mortgages and, to the extent more exacting, the
procedures used by the Master Servicer in respect of the foregoing timeshare
receivables serviced by it for its own account. The duties of the Master
Servicer shall include collection and posting of all payments, responding to
inquiries of Obligors on the Receivables, investigating delinquencies, sending
payment coupons to Obligors, reporting tax information to Obligors, accounting
for collections and furnishing monthly statements to the Agent and the
Purchasers substantially in the form of Exhibit E hereto, which statements shall
be delivered no later than the Settlement Date in each month. The Master
Servicer shall have, subject to the terms of this Agreement, full power and
authority, acting alone, and subject only to the specific requirements and
prohibitions of this Agreement, to do any and all things in connection with such
managing, servicing, administration and collection that it may deem necessary or
desirable. Without limiting the generality of the foregoing, but subject to the
other provisions of this Agreement, the Master Servicer is authorized and
empowered by the Agent, acting on behalf of the Purchasers, to execute and
deliver, on behalf of itself, the Agent, the Purchasers or any of them, any and
all instruments of satisfaction or cancellation, or of partial or full release
or discharge, and all comparable instruments, with respect to the Receivables
and, in the case of Mortgage Loan Receivables, the related Mortgaged Properties.
The Agent shall furnish the Master Servicer any powers of attorney or other
documents necessary or appropriate to enable the Master Servicer to carry out
its servicing and administrative duties hereunder.
(b) The Master Servicer may enter into Subservicing Agreements with one
or more Subservicers approved by the Agent for the servicing and administration
of certain of the Receivables. The Master Servicer shall notify the Agent
promptly if a Subservicer is hired. References in this Agreement to actions
taken or to be taken by the Master Servicer in servicing the Receivables include
actions taken or to be taken by a Subservicer on behalf of the Master Servicer
and the Agent. Each Subservicing Agreement will be upon such terms and
conditions as are not inconsistent with this Agreement and as the Master
Servicer and the Subservicer have agreed. With the approval of the Master
Servicer and the Agent, a Subservicer may delegate its servicing obligations to
third-party servicers, but such Subservicer will remain obligated under the
related Subservicing Agreement. The Master Servicer and a Subservicer may enter
into amendments thereto or different forms of Subservicing Agreements; provided,
however, that
-59-
<PAGE> 65
any such amendments or different forms shall be consistent with and not violate
the provisions of this Agreement or materially adversely affect the rights of
the Agent or the Purchasers.
The Master Servicer shall be entitled to terminate any Subservicing
Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this Agreement;
provided, however, that in the event of termination of any Subservicing
Agreement by the Master Servicer or the related Subservicer, the Master Servicer
shall either act directly as servicer of the related contract or enter into a
Subservicing Agreement with a successor Subservicer approved by the Agent which
will be bound by the terms of the related Subservicing Agreement.
Notwithstanding any Subservicing Agreement, any of the provisions of
the Agreement relating to agreements or arrangements between the Master Servicer
or a Subservicer or reference to actions taken through such Persons or
otherwise, the Master Servicer shall remain obligated and liable to the Agent
and the Purchasers for the servicing and administering of the Receivables in
accordance with the provisions of this Agreement without diminution of such
obligation or liability by virtue of such Subservicing Agreements or
arrangements or by virtue of indemnification from a Subservicer and to the same
extent and under the same terms and conditions as if the Master Servicer alone
were servicing and administering the Receivables. The Master Servicer shall be
entitled to enter into any agreement with a Subservicer for indemnification of
the Master Servicer and nothing contained in this Agreement shall be deemed to
limit or modify such indemnification.
Any Subservicing Agreement that may be entered into and any other
transactions or servicing arrangements relating to the Receivables involving a
Subservicer or an affiliate of the Master Servicer in its capacity as such shall
be deemed to be between the Subservicer or other affiliate of the Master
Servicer, as the case may be, and the Master Servicer alone, and the Agent and
the Purchasers shall not be deemed parties thereto and shall have no claims,
rights, obligations, duties or liabilities with respect to the Subservicer
except as set forth in the immediately succeeding paragraph; provided that the
Agent and the Purchasers may rely upon all representations and warranties of the
Subservicer contained therein.
In the event the Master Servicer shall for any reason no longer be a
servicer of the Receivables (including, but not limited to, by reason of a
Termination Event), the Agent or its designee may, at the sole discretion of the
Agent, thereupon assume all of the rights and obligations of such Master
Servicer under each Subservicing Agreement selected by the Agent in its sole
discretion. In such event, the Agent, its designee or the successor servicer for
the Agent shall be deemed to have assumed all of the Master Servicer's interest
therein and to have replaced
-60-
<PAGE> 66
the Master Servicer as a party to each such Subservicing Agreement to the same
extent as if such Subservicing Agreement had been assigned to the assuming party
except that the Master Servicer shall not thereby be relieved of any liability
or obligations under the Subservicing Agreement. The Master Servicer shall, upon
request of the Agent but at the expense of the Master Servicer, deliver to the
assuming party all documents and records relating to each such Subservicing
Agreement and the Receivables then being serviced and an accounting of amounts
collected and held by it and otherwise use its best efforts to effect the
orderly and efficient transfer of the Subservicing Agreement to the assuming
party.
The Master Servicer shall retain all data (including, without
limitation, computerized records) relating directly to or maintained in
connection with the servicing of the Receivables at the address of the Master
Servicer set forth in Section 15.05, at one of the addresses listed on Schedule
5 hereto, at the office of any Subservicer or, upon 15 days, notice to the
Agent, at such other place where the servicing offices of the Master Servicer
are located, and shall give the Agent access to all data at all reasonable
times, and, during the continuation of a Termination Event, the Master Servicer
shall, on demand of the Agent, deliver or cause to be delivered to the Agent all
data (including, without limitation, computerized records and, to the extent
transferable, related operating software) necessary for the servicing of the
Receivables and all monies collected by it and required to be deposited in or
credited to the Collection Account.
(c) The Master Servicer may, from time to time and with the consent of
the Agent, make changes to the Credit and Collection Policies, provided that no
such change can materially impair the collectibility of any Receivable. Copies
of each such revised Credit and Collection Policies shall replace the version
existing as Schedule 1 or 2, as the case may be.
(d) All expenses incurred by the Master Servicer, including expenses
incurred by any Subservicer, in performing their obligations hereunder shall be
for the account of the Master Servicer, and the Purchasers and the Agent shall
have no obligations to make any payments in respect thereof.
(e) No later than one Business Day prior to each Settlement Date, the
Master Servicer shall prepare and forward to the Agent by telecopier and to each
Purchaser by overnight courier service for delivery on the next immediately
succeeding Business Day, a settlement certificate, certified by an officer of
the Master Servicer, substantially in the form attached hereto as Exhibit E.
Section 10.03. Collection Responsibilities; Receivable Modifications.
(a) The Master Servicer shall, on behalf of the Agent, collect all
payments made under each Receivable and shall use its reasonable efforts to
collect from each Obligor all payments on or
-61-
<PAGE> 67
in respect of such Receivable after the related Cutoff Date. The Master Servicer
may in its discretion waive any assumption fees, late payment charges, charges
for checks returned for insufficient funds, prepayment fees, if any, or other
fees which may be collected in the ordinary course of servicing the Receivables.
Notwithstanding anything to the contrary in this Agreement, neither the Master
Servicer nor the Agent shall modify, waive or amend the terms of any Mortgage
Loan Receivable unless a default thereon has occurred or is imminent or unless
such modification, amendment or waiver shall not (i) alter the interest rate on,
the principal amount of, or the timing of payments of interest and principal in
respect of, such Mortgage Loan Receivable, (ii) materially impair the related
Mortgaged Property or (iii) reduce materially the likelihood that payments of
interest and principal on such Mortgage Loan Receivable shall be made when due;
provided, however, that the Master Servicer shall not reschedule the payment of
delinquent payments more than one time in any 12 consecutive months with respect
to any Obligor.
(b) Subject to Section 4.03, the Master Servicer shall remit, by any
commercially acceptable method, to the appropriate party the portion of such
payments representing Miscellaneous Payments, it being understood that such
Miscellaneous Payments may be retained by the Master Servicer or applied on
behalf of obligors, as the case may be; provided, that the Master Servicer shall
remit portions of Miscellaneous Payments constituting homeowners' association
fees and condominium association fees to the related condominium association or
the related homeowners' association, as the case may be.
Section 10.04. Maintenance of Insurance.
(a) The Master Servicer shall maintain or cause the related Association
to maintain fire insurance with extended coverage on the Project in an amount
which is at least equal to the replacement cost of the improvements which are a
part of such Project, but in no event less than such amount as is necessary to
avoid the application of any co-insurance clause in the related hazard insurance
policy. It is understood and agreed that no earthquake, flood or other
additional insurance is to be required of any Obligor or the Association other
than pursuant to such applicable laws and regulations as shall at any time be in
force and as shall require such additional insurance.
The Master Servicer agrees to prepare and present, or cause the
Association to prepare and present, claims under each insurance policy
maintained pursuant to this Section in a timely fashion in accordance with the
terms of such policy and to take such reasonable steps as are necessary to
enable the Association or the Master Servicer, as appropriate, to receive
payment or to permit recovery thereunder and to restore and repair the Project
and the Mortgaged Property. Each insurance policy maintained under this Section
shall be issued by an issuer with a General Policy Rating of "A" or better in
Best's Key Rating Guide.
-62-
<PAGE> 68
(b) The Master Servicer shall cause each Subservicer and any successor
Subservicers to keep in force during the term of this Agreement a policy or
policies of insurance covering errors and omissions in the operation of such
Subservicer's procedures, and a fidelity bond. Such policy or policies and
fidelity bond shall be in such form and amount that would meet the requirements
of FHLMC if it were the purchaser of the Mortgage Loans and the Subservicer were
servicing and administering the Mortgage Loans for FHLMC. In the event any
Subservicing Agreement is terminated and the Master Servicer does not enter a
Subservicing Agreement with a successor Subservicer, the Master Servicer shall
obtain a policy or policies of insurance covering errors and omissions in the
operation of the Master Servicer's procedures and fidelity bond in such form and
amount as specified in the immediately preceding sentence. The Master Servicer
shall be deemed to have complied with this provision if an affiliate of the
Master Servicer has such errors and omissions and fidelity bond coverage and, by
the terms of such insurance policy or fidelity bond, the coverage afforded
thereunder extends to the Master Servicer. Any such errors and omissions policy
and fidelity bond shall not be cancelled without 30 days' prior written notice
to the Agent.
(c) The Master Servicer shall cause each Subservicer and any successor
Subservicer to keep in force during the term of this Agreement insurance
coverage in such amounts as shall be normal and usual in the business.
Section 10.05. Assumption and Substitution Agreements. The Master
Servicer is authorized to take or enter into an assumption or substitution
agreement from or with the Person to whom property subject to a Mortgage has
been or is about to be conveyed. The Master Servicer is also authorized, if
required by law to do so, to release the original Obligor from liability upon
the Mortgage Loan Receivable and substitute the new mortgagor as Obligor
thereon. In connection with such assumption of substitution, the Master Servicer
shall apply such underwriting standards and follow such practices and procedures
as shall be normal and usual and as it applies to mortgage loan timeshare
receivables owed solely by it. Notwithstanding the foregoing, in connection with
any transfer of ownership of a Mortgaged Property by an Obligor to any Person,
the Master Servicer shall not agree to any change in the rate of interest borne
by, the maturity date of, the principal amount of, the timing of payments of
principal and interest in respect of, and all other material terms of, the
related Mortgage Note. The Master Servicer shall notify the Agent that any such
assumption or substitution agreement has been completed and if requested to do
so by the Agent, shall forward to the Agent a copy of such assumption or
substitution agreement for the Agent's review. The original of any assumption or
substitution agreement shall be added to the related Receivable File and shall,
for all purposes, be considered a part of such Receivable File to the same
extent as all other documents and instrument constituting a part thereof. In
connection with any such assumption or substitution agreement, the related
Mortgage Note shall not be changed. Any fee collected by
-63-
<PAGE> 69
the Master Servicer for entering into an assumption or substitution of liability
agreement will be retained by the Master Servicer as additional servicing
compensation.
Section 10.06. Realization upon Defaulted Receivables.
(a) The Master Servicer shall foreclose upon or otherwise comparably
convert the ownership of the Mortgaged Properties securing such of the Mortgage
Loan Receivable as come into and continue in default and as to which no
satisfactory arrangements can be made for collection of delinquent payments
pursuant to Section 10.02. In connection with such foreclosure or other
conversion, the Master Servicer shall follow such practices and procedures as it
shall deem necessary or advisable and as shall be normal and usual in its
general mortgage servicing activities; provided that if the Master Servicer has
actual knowledge or reasonably believes that any Mortgaged Property is affected
by hazardous or toxic waste or substances, then the Master Servicer need not
acquire title to such Mortgaged Property in a foreclosure or similar proceeding.
The foregoing is subject to the proviso that the Master Servicer shall not be
required to expend its own funds in connection with any foreclosure or to
restore any damaged property unless it shall determine that such foreclosure or
restoration will increase the Liquidation Proceeds available to the Seller after
reimbursement to the Master Servicer for its Liquidation Expenses.
(b) In connection with the foreclosure or liquidation of any Defaulted
Receivable that is a Right to Use Receivable, the Master Servicer shall follow
such practices and procedures as it shall deem necessary or advisable and as
shall be normal and usual in its general servicing activities. The Master
Servicer shall be required to expend its own funds in connection with the
liquidation of any Defaulted Receivable that is a Right to Use Receivable, if it
shall determine that such expenditures will increase the Liquidation Proceeds
available to the Seller after reimbursement to the Master Servicer for its
Liquidation Expenses.
(c) Liquidation Expenses incurred by the Master Servicer can be repaid
to the Master Servicer only from Liquidation Proceeds from sale or other
disposition of the related Defaulted Receivables.
Section 10.07. Payment of Fees and Expenses of Agent; No Offset. Prior
to the termination of this Agreement, the obligations of the Master Servicer
under this Agreement shall not be subject to any counterclaim or right of offset
which the Master Servicer has or may have against the Agent, whether in respect
of this Agreement, any Receivable or otherwise.
Section 10.08. Servicing Fee. The Seller shall pay to the
Master Servicer out of Collected Interest a fee (the "Servicing
Fee") for each day until the first Business Day after the
Commitment Termination Date on which the Aggregate Undivided
-64-
<PAGE> 70
Interest shall be reduced to zero and all Obligations shall have been fully paid
and performed. The accrued Servicing Fee shall be paid in arrears on each
Settlement Date and on the first Business Day after the Commitment Termination
Date on which the Aggregate Undivided Interest shall be reduced to zero and all
obligations shall have been fully paid and performed. The Servicing Fee shall be
calculated for each day as an amount equal to the product of (i) 1.75%, (ii) the
Outstanding Principal Balance of the Receivables comprising the Receivables Pool
as of such day and (iii) a fraction, the numerator of which is one and the
denominator of which is 360. In no event shall the Agent or any Purchaser have
any obligation to pay any fee in respect of the services to be provided
hereunder.
Section 10.09. Representations and Warranties as to the Master
Servicer. The Master Servicer represents and warrants to the Agent for the
benefit of the Purchasers that:
(a) Organization and Good Standing. The Master Servicer shall
have been duly organized and shall be validly existing as a corporation
in good standing under the laws of the jurisdiction of its
incorporation, with power and authority to own its properties and to
conduct its business as such properties shall be currently owned and
such business is presently conducted.
(b) Due Qualification. The Master Servicer shall be duly
qualified to do business as a foreign corporation in good standing, and
shall have obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of property or the
conduct of its business shall require such qualifications, except where
the failure to so qualify or to have obtained such licenses and
approvals would not have a material adverse effect on the ability of
the Master Servicer to perform its obligations under this Agreement or
the other Facility Documents to which it is a party.
(c) Power and Authority. The Master Servicer shall have the
power and authority to execute, deliver and perform its obligations
under the Agreement and each other Facility Document to which it is a
party and to carry out their respective terms; and the execution,
delivery and performance of this Agreement and each other Facility
Document to which it is a party shall have been duly authorized by the
Master Servicer by all necessary corporate action.
(c) Binding Obligations. This Agreement shall constitute a
legal, valid and binding obligation of the Master Servicer enforceable
in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization or other similar laws
affecting the enforcement of creditors' rights in general and by
general principles of equity.
-65-
<PAGE> 71
(e) No Violation. The consummation of the transactions
contemplated by this Agreement and the other Facility Documents to
which the Master Servicer is a party and the fulfillment of the terms
of this Agreement and the other Facility Documents shall not conflict
with, result in any breach of any of the terms and provisions of, nor
constitute (with or without notice or lapse of time) a default under,
the articles of incorporation or bylaws of the Master Servicer, or
conflict with or violate any of the terms or provisions of, or
constitute (with or without notice or lapse of time) a default under,
any material indenture, agreement or other instrument to which the
Master Servicer is a party or by which it shall be bound; nor violate
any law or, to the best of the Master Servicer's knowledge, any order,
rule or regulation applicable to the Master Servicer of any court or of
any federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Master
Servicer or its properties; which breach, default, conflict or
violation would have a material adverse effect on the ability of the
Master Servicer to perform its obligations under this Agreement or the
other Facility Documents to which it is a party.
Section 10.10. Existence; Status as Master Servicer; Merger.
(a) Except as otherwise permitted by Section 10.02(f), the Master
Servicer shall keep in full effect its existence, rights and franchises as a
corporation under the laws of the state of its organization and shall obtain and
preserve its qualification to do business as a foreign corporation, in each case
to the extent necessary to protect the validity and enforceability of the
Receivables (and, in the case of Mortgage Loan Receivables, the related Mortgage
Notes and Mortgages) and this Agreement.
(b) The Master Servicer shall not consolidate with or merge into any
other Person or convey, transfer or lease substantially all of its assets as an
entirety to any Person unless the Person formed by such consolidation or into
which the Master Servicer has been merged or the Person which acquires
substantially all the assets of the Master Servicer as an entirety is a
corporation organized under the laws of a state in the United States, can
lawfully perform the obligations of the Master Servicer hereunder and executes
and delivers to the other parties hereto an agreement, in form and substance
reasonably satisfactory to the Agent (acting upon the direction of the
Purchasers), which contains an assumption by such successor entity of the due
and punctual performance and observance of each covenant and condition to be
performed or observed by the Master Servicer under this Agreement.
(c) From the date hereof until the first day following the Commitment
Termination Date on which (i) the Aggregate Undivided Interest shall be reduced
to zero and (ii) all Obligations shall have been fully paid and performed, the
Master Servicer shall, unless the Agent (acting upon the direction of the
Required
-66-
<PAGE> 72
Purchasers) shall otherwise consent in writing, promptly after learning thereof,
notify the Agent of (i) the details of any action, proceeding, investigation or
claim against or affecting the Master Servicer instituted before any court,
arbitrator or Governmental Authority or, to its knowledge threatened to be
instituted, which, if determined adversely to the Master Servicer would be
likely to have a material adverse effect on the performance by it of its
obligations under any Facility Document to which is a part or by which it is
bound.
Section 10.11. Performance of obligations. The Master Servicer shall
not take any action or, to the extent within its control, permit any action to
be taken by others, which would excuse any Obligor from any of its covenants or
obligations under any Mortgage Note or Mortgage, or under any other instrument
relating thereto, or which would result in the amendment, hypothecation,
subordination, termination or discharge of, or impair the validity or
effectiveness of, any Mortgage Note or Mortgage or any such instrument, without
the written consent of the Agent, except as expressly provided herein and
therein.
Section 10.12. Liability of the Master Servicer; Indemnities. The
Master Servicer shall be liable in accordance herewith only to the extent of the
obligations specifically undertaken by the Master Servicer under this Agreement.
Such obligations shall include the following:
(a) The Master Servicer shall indemnify, defend and hold
harmless the Agent and the Purchasers from and against any loss,
liability or expense incurred by reason of the Master Servicer's
negligence, willful misfeasance or bad faith in the performance of its
obligations and duties hereunder, reckless disregard of its obligations
and duties hereunder or breach of any provision hereof.
(b) The Master Servicer shall indemnify, defend and hold
harmless the Agent and the Purchasers from and against all costs,
expenses, losses, claims, damages and liabilities arising out of or
incurred in connection with the acceptance or performance of its duties
herein contained, except to the extent that any such cost, expense,
loss, claim, damage or liability: (i) shall be due to the willful
misfeasance, bad faith or negligence of the Agent or any Purchaser or
successor Master Servicer, (ii) relates to any Tax other than the Taxes
with respect to which the Master Servicer shall be required to
indemnify the Agent or (iii) shall be one as to which the Seller is
required to indemnify the Agent.
Indemnification under this Section shall include, without limitation,
reasonable fees and expenses of counsel and expenses of litigation, and appeals
therefrom (including, but not limited to, any such fees and costs incurred in
bankruptcy, receivership or similar proceedings). If the Master Servicer shall
have made any indemnity payments to the Agent pursuant to this Section and the
-67-
<PAGE> 73
Agent thereafter shall collect any of such payments from others, the Agent shall
repay such amounts to the Master Servicer, with interest to the extent collected
(which interest shall not be an expense of the Agent or any Purchaser). The
indemnifications under this Section shall survive the termination of this
Agreement and the appointment of any successor Agent.
ARTICLE ELEVEN
TERMINATION EVENTS
Section 11.01. Termination Events. Each of the following
events shall constitute a "Termination Event":
(a) The Seller or either Originator shall fail to make any
payment or deposit required under this Agreement or the related
Purchase Agreement, in each case that continues unremedied for three
Business Days after discovery of such failure by an officer of the
Seller or the related originator or written notice of such failure is
given to the Seller or such Originator by the Agent;
(b) Any representation and warranty made by the Seller or the
Originators in this Agreement, the Purchase Agreements or any of the
other Facility Documents regarding corporate organization or authority
or the enforceability of this Agreement, the Purchase Agreements or any
of the other Facility Documents or any information required to be given
by the Originators to identify the Receivables proves to have been
incorrect in any material respect when made, and which continues to be
incorrect in any material respect for a period of 30 days after written
notice is delivered by the Agent pursuant to the terms of this
Agreement;
(c) Failure of the Seller or either Originator to observe or
perform in any material respect any material covenant or agreement
under this Agreement, the Purchase Agreements or any other Facility
Document which continues unremedied for a period of 30 days after
written notice is delivered by the Agent to the Seller or the related
Originator pursuant to the terms of this Agreement; or shall fail to
perform or observe any other term, covenant or agreement contained in
this Agreement or in any other Facility Document on its part to be
performed or observed and such failure shall remain unremedied for 30
days after written notice thereof shall have been given by the Agent to
the Seller or such Originator;
(d) Any Indebtedness of the Seller in excess of $100,000 shall
be declared to be due and payable or required to be prepaid (other than
by regularly scheduled required prepayment) prior to the stated
maturity thereof;
-68-
<PAGE> 74
(e) The entry of a decree or order by a court or agency or
supervisory authority having jurisdiction in the premises for the
appointment of a trustee in bankruptcy, conservator, receiver or
liquidator of the Seller, JELD-WEN, either Originator, WorldMark or any
Association in any bankruptcy, insolvency, readjustment of debt,
marshalling of assets and liabilities or similar proceedings, or for
the winding up or liquidation of their respective affairs, and the
continuance of any such decree or order unstayed and in effect for a
period of 60 days;
(f) The consent by the Seller, JELD-WEN, either Originator,
WorldMark or any Association to the appointment of a trustee in
bankruptcy, conservator or receiver or liquidator in any bankruptcy,
insolvency, readjustment of debt, marshalling of assets and liabilities
or similar proceedings of or relating to any of the foregoing entities
of or relating to substantially all of their property; or the Seller,
JELD-WEN, either Originator or WorldMark shall admit in writing its
inability to pay its debts generally as they become due, file a
petition to take advantage of any applicable insolvency or
reorganization statute, make an assignment for the benefit of its
creditors or voluntarily suspend payment of its obligations;
(g) Any judgment shall have been entered (and shall have
remained unsatisfied or unstayed for more than ten Business Days)
against either Originator or the Seller that if levied upon would have
a material adverse effect on the condition, financial or otherwise, on
the earnings, business affairs or business prospects of such Originator
or the Seller;
(h) The Seller becomes an "investment company" and is required
to register as such under the Investment Company Act;
(i) The IRS shall file notice of a lien pursuant to Section
6323 of the Code with regard to any Receivable and such lien shall not
have been released within ten Business Days, or the PBGC shall file
notice of a lien pursuant to Section 4068 of ERISA with regard to any
Receivable and such lien shall not have been released within ten
Business Days;
(j) If JELD-WEN or any Subsidiary shall fail to pay when due
(whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) any Indebtedness in excess of $750,000 and such
failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Indebtedness;
(k) If, as of any Settlement Date,(i)the Charge-off Rate or
the Consolidated Charge-off Rate exceeds 5% per annum, (ii) the average
of the Delinquency Rate Amounts or the Consolidated Delinquency Rate
Amounts, in either case for the three Collection Periods immediately
preceding the Collection
-69-
<PAGE> 75
Period in which such Settlement Date occurs exceeds 5%, (iii) the
average of the Defaulted Receivable Amounts or the Consolidated
Defaulted Receivable Amounts, in either case for the three Collection
Periods immediately preceding the Collection Period in which such
Settlement Date occurs exceeds 3% or (iv) the Portfolio Yield is
negative;
(l) If the Collateral Percentage falls below 125% and within
five Business Days after the Seller learns of such event or is given
notice of such event by the Agent or the Master Servicer it does not
cause the Collateral Percentage to equal or exceed 125%; or
(m) If the Seller has a Net Worth less than an amount equal to
the greater of (i) $5,000,000 or (ii) the product of 0.25 and the
Commitment Amount; or
(n) WorldMark, on an annual basis, has excess of revenues over
expenses of less than $0.
Section 11.02. Remedies.
(a) Upon the occurrence of (i) a Termination Event described in Section
11.01(e) or 11.01(f), the Commitment shall be terminated, the Agent shall have
been deemed to have given notice of the occurrence of a Termination Event to the
Seller, and the Obligations shall become due and payable (from Collections or
otherwise), all without further act or notice by the Agent or the Purchasers,
(ii) a Termination Event described in Section 11.01(a) the Agent or any
Purchaser may give notice to the Seller that the Commitment shall be terminated,
the Agent shall have been deemed to have given notice of the occurrence of a
Termination Event to the Seller and the Obligations shall become due and payable
(from Collections or otherwise) and (iii) any other Termination Event, the Agent
shall, at the request of the Required Purchasers, immediately terminate the
Commitment, give notice to the Seller of the occurrence of a Termination Event,
and declare the obligations due and payable (from Collections or otherwise).
(b) Upon any termination of the Commitment pursuant to this Section,
the Agent and the Purchasers shall have, in addition to all other rights and
remedies under this Agreement and the other Facility Documents, all rights and
remedies provided under the UCC of each applicable jurisdiction and under other
applicable laws, which rights shall be cumulative.
ARTICLE TWELVE
THE AGENT
Section 12.01. Authorization and Action. Each Purchaser hereby appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this
-70-
<PAGE> 76
Agreement as are delegated to the Agent by the terms hereof, together with such
powers as are reasonably incidental thereto. The Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement. The duties
of the Agent shall be mechanical and administrative in nature, it shall not have
by reason of this Agreement a fiduciary relationship in respect of any Purchaser
and nothing in this Agreement or the other Facility Documents, expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations in respect of this Agreement or the other Facility Documents except
as expressly set forth herein or in such other Facility Documents. As to any
matters not expressly provided for by this Agreement, the Agent shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining) upon the instructions of the Required Purchasers, and such
instructions shall be binding upon all Purchasers, provided that the Agent shall
not be required to take any action which exposes it to personal liability or
which is contrary to any Facility Document or applicable law and provided,
further, that without the prior written consent of all Purchasers, the Agent
shall not, nor can the Agent be instructed to, change or modify (a) any
requirement that any particular action be taken by the Required Purchasers or by
all the Purchasers, (b) the definition of "Required Purchasers", (c) the
Commitment Amount or any Purchasers' Pro Rate Share thereof, (d) the amount of
the Commitment Fees or the Upfront Fee, (e) the Commitment Termination Date
(except as provided in Section 2.03), (f) the date for payment of any Earned
Yield or (g) the amount of the Earned Yield and provided, further, that the
terms of Sections 5.01 and 13.02 and this Article shall not be amended without
the prior written consent of the Agent (acting for its own account). In the
absence of instructions from the Required Purchasers, the Agent shall have
authority (but no obligation), in its sole discretion, to take or not to take
any action, unless this Agreement specifically requires the consent of all
Purchasers or of the Required Purchasers and any such action or failure to act
shall be binding on all the Purchasers. Each Purchaser shall execute and deliver
such additional instruments, including powers of attorney in favor of the Agent,
as may be necessary or desirable to enable the Agent to exercise its powers
hereunder.
Section 12.02. Duties and Obligations.
(a) Neither the Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken by it or
any of them under or in connection with this Agreement except for its or their
own gross negligence or willful misconduct. Without limiting the generality of
the foregoing, the Agent (i) may treat each Purchaser as the party entitled to
receive payments hereunder except as otherwise provided in Article Thirteen;
(ii) may consult with legal counsel (including counsel for the Seller),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the
-71-
<PAGE> 77
advice of such experts; (iii) makes no warranty or representation to any
Purchaser and shall not be responsible to any Purchaser for any statements,
warranties or representations made in or in connection with this Agreement or in
any instrument or document furnished pursuant hereto; (iv) shall not have any
duty to ascertain or to inquire as to the performance of any of the terms,
covenants or conditions of the Facility Documents on the part of the Seller or
as to the existence or possible existence of any Unmatured Termination Event or
Termination Event; (v) shall not be responsible to any Purchaser for the due
execution, legality, validity, enforceability, genuineness, effectiveness or
value of this Agreement or of any instrument or document furnished pursuant
hereto; and (vi) shall incur no liability under or in respect to this Agreement
by acting upon any oral or written notice, consent, certificate or other
instrument or writing (which may be by telegram, facsimile transmission, cable
or telex) believed by it to be genuine and signed or sent by the proper party or
parties or by acting upon any representation or warranty of the Seller made or
deemed to be made hereunder.
(b) The Agent will account to each Purchaser for its Pro Rata Share of
payments made for the ratable account of the Purchasers which are received by
the Agent from the Seller and will promptly remit to the Purchasers entitled
thereto all such payments. The Agent will transmit to each Purchaser copies of
all documents received from the Seller pursuant to the requirements of this
Agreement other than documents which by the terms of this Agreement the Seller
is obligated to deliver directly to the Purchasers.
(c) Each Purchaser or its assignee shall furnish to the Agent in a
timely fashion such documentation (including, but not by way of limitation, IRS
Forms Nos. 1001, 4224 and W-8) as may be required by applicable law or
regulation or as may reasonably be requested by Agent to establish such
Purchaser's status for tax withholding purposes.
Section 12.03. Dealings With the Seller. With respect to its portion of
the Commitment and the Purchases made by it, the Agent shall have the same
rights and powers under this Agreement as any other Purchaser and may exercise
the same as though it were not the Agent, and the term "Purchaser" shall unless
otherwise expressly indicated include the Agent in its individual capacity. The
Agent may accept deposits from, lend money to, act and generally engage in any
kind of business with the Seller and any Person which may do business with the
Seller, all as if the Agent were not the Agent hereunder and without any duty to
account therefor to the Purchasers.
Section 12.04. Purchaser Credit Decision. Each Purchaser acknowledges
that it has, independently and without reliance upon the Agent or any other
Purchaser and based upon such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Purchaser also acknowledges that it will, independently and
without reliance
-72-
<PAGE> 78
upon the Agent or any other Purchaser and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Facility Documents.
Section 12.05. Right to Rely on Payments.
(a) Unless the Agent shall have been notified in writing by a Purchaser
by 2:00 p.m., Seattle time, on the day prior to a Purchase (other than a
Reinvestment) that such Purchaser will not make available the amount which would
constitute its Pro Rata Share of the amount to be paid in connection with such
Purchase, the Agent may assume that such Purchaser has made such amount
available to the Agent and, in reliance upon such assumption, make available to
the Seller a corresponding amount. If and to the extent that such Purchaser
shall not have made such amount available to the Agent, such Purchaser and the
Seller severally agree to repay the Agent forthwith on demand such amount
together with interest thereon, for each day from the date the Agent made such
amount available to the Seller to the date such amount is repaid to the Agent,
at the Yield Rate applicable to such Purchase when first made.
(b) Unless the Agent shall have been notified by telephone and such
notice shall have been confirmed in writing by the Master Servicer by 2:00 p.m.,
Seattle time, on the day prior to the date any payment is due hereunder that the
Master Servicer will not make the full amount of all payments scheduled to be
made by it on such due date, the Agent may assume that the Master Servicer has
made such amount available to the Agent and, in reliance upon such assumption,
make available to itself and the Purchasers their respective shares of such
amount. If the Agent makes any such amount available to any Purchaser, but such
amount was not in fact made available by the Master Servicer to the Agent on
such due date, such Purchaser shall pay to the Agent on demand the amount
previously made available to such Purchaser, together with interest on such
amount at the daily average Federal Funds Rate for the number of days from and
including the date on which such Purchaser received such amount to the date on
which such amount becomes immediately available to the Agent. A statement of the
Agent submitted to any Purchaser with respect to any amounts owing under this
paragraph shall be conclusive and binding in the absence of manifest error. If
such amount is not in fact repaid to the Agent by such Purchaser within two
Business Days after the date on which such Purchaser is informed by the Agent
that such amount was not made available to the Agent by the Purchaser then the
Agent shall be entitled to recover on demand an amount calculated in the manner
specified in the second preceding sentence of this clause (b) after substituting
the term "Reference Rate" for the term "Federal Funds Rate."
Section 12.06. Limitations on Liability; Indemnification.
-73-
<PAGE> 79
(a) Anything herein to the contrary notwithstanding, the Agent and the
Purchasers shall have no obligations or liabilities with respect to any Assigned
Collateral, nor shall any of them be obligated to perform any of the obligations
of the Seller owing to any Obligor under the Receivables or in respect thereof.
(b) The Purchasers agree to indemnify the Agent (to the extent not
reimbursed by the Seller) ratably according to their respective Pro Rata Shares
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, Taxes (in the case of Tax
liabilities in respect of earnings or gains from the investment of funds held in
the Collection Account), expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement or any other Facility
Document or any action taken or omitted by the Agent under this Agreement or any
other Facility Document, except any such as result from the Agent's gross
negligence or willful misconduct. Without limiting the foregoing, each Purchaser
agrees to reimburse the Agent promptly on demand in proportion to its Pro Rata
Share for any out-of-pocket expenses, including legal fees, incurred by the
Agent in connection with the administration or enforcement of or the
preservation of any rights under this Agreement or any other Facility Document
(to the extent that the Agent is not reimbursed for such expenses by the Seller)
The foregoing indemnities shall survive the termination of this Agreement.
Section 12.07. Successor Agent. The Agent may give written notice of
resignation at any time to the Purchasers and the Seller which resignation shall
not be effective until at least 30 days thereafter and the Agent may be removed
at any time with cause by the Required Purchasers. Upon any such notice of
resignation or removal, the Required Purchasers shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Required Purchasers and shall have accepted such appointment within 30 days
after the retiring Agent's giving of notice of resignation or the removal of the
retiring Agent by the Required Purchasers, then the retiring Agent may on behalf
of the Purchasers, appoint a successor Agent, which shall be a bank organized
under the laws of the United States or of any state thereof, or any affiliate of
such bank, and having a combined capital and surplus of at least $100,000,000.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement.
Until the acceptance by such a successor Agent, the retiring Agent shall
continue as "Agent" hereunder. After any retiring Agent's resignation or removal
hereunder as Agent shall become effective, the provisions of this Article shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement.
-74-
<PAGE> 80
Section 12.08. Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Facility Document to which it is a
party by or through agents, employees or attorneys-in-fact and shall be entitled
to the advice of counsel concerning all matters pertaining to such duties. The
Agent shall not be held liable to any Purchaser for the negligence or misconduct
of any agent or attorney-in-fact that the Agent selects with reasonable care.
Section 12.09. Merger of Agent. Any Person into which the Agent may be
merged or converted or which it may be consolidated with or any Person resulting
from any merger, conversion or consolidation to which it shall be a party or any
Person to which the Agent may sell or transfer all or substantially all of its
agency relationships shall be the successor to the Agent without the execution
or filing of any paper or further act, anything herein to the contrary
notwithstanding.
ARTICLE THIRTEEN
ASSIGNMENTS AND PARTICIPATIONS
Section 13.01. Generally. Each Purchaser may assign, or sell
participations in, its share of the Aggregate Net Investment and in the
Commitment to one or more Persons in accordance with this Article. Unless the
Agent (acting upon the direction of the Required Purchasers) shall otherwise
consent in writing, the Seller may not assign or delegate any of its rights or
duties hereunder and any such assignment or delegation purported to be made
shall be void and of no effect.
Section 13.02. Assignments. Any Purchaser, with the prior written
consent (which prior consent from the Seller and Master Servicer shall not be
required if a Termination Event shall have occurred and is continuing) of the
Seller, the Agent and the Master Servicer (which consents will not be
unreasonably withheld) , may at any time assign and delegate to one or more
commercial banks or other financial institutions (each, an "Assignee
Purchaser"), all or any fraction of its Pro Rata Share of the Aggregate Net
Investment and its Pro Rata Share of the Commitment (which assignment and
delegation shall be a constant, and not a varying, percentage of all the
assigning Purchasers, share of the Aggregate Net Investment and its share of the
Commitment) to one or more commercial banks or other financial institutions
(each, an "Assignee Purchaser"). Notwithstanding the foregoing,(i)the portion of
the Commitment assigned to any Assignee Purchaser shall not be less than
$1,000,000 unless such assignment covers all of the assigning Purchasers,
interests and obligations under all Facility Documents and (ii) any Assignee
Purchaser must purchase interests in the assigning Purchasers' share of the
Aggregate Net Investment and of the Commitment and other obligations in equal
proportions.
-75-
<PAGE> 81
The Seller, the Master Servicer and the Agent shall be entitled to
continue to deal solely and directly with such assigning Purchaser in connection
with the interests and obligations so assigned and delegated to an Assignee
Purchaser until
(i) the Agent and Seller shall have approved the proposed
assignment;
(ii) written notice of such assignment and delegation,
together with payment instructions, addresses and related information
with respect to such Assignee Purchaser, shall have been given to the
Seller, the Master Servicer and the Agent by such Purchaser and such
Assignee Purchaser;
(iii) such Assignee Purchaser shall have executed and
delivered to the Seller, the Master Servicer and the Agent an agreement
pursuant to which such Assignee Purchaser shall be bound to the terms
of this Agreement and the other Facility Documents in form and
substance acceptable to the Agent; and
(iv) the processing fees described below shall have been
paid.
From and after the date that all of the foregoing conditions shall have
been fully satisfied, (A) the Assignee Purchaser shall be deemed automatically
to have become a party hereto and to the extent that rights and obligations
hereunder have been assigned and delegated to such Assignee Purchaser in
connection with such assignment, shall have the rights and obligations of a
Purchaser hereunder and under the other Facility Documents and (B) the assigning
Purchaser, to the extent that rights and obligations under the Facility
Documents have been assigned and delegated by it, shall be released from its
obligations which are not then due and payable under the Facility Documents.
The assigning Purchaser must pay an administrative processing fee
(which fee shall not be reimbursable by the Seller) to the Agent in an amount of
$1,000. Any attempted assignment and delegation not made in accordance with this
Section shall be null and void.
In connection with each assignment and delegation effected in
accordance with this Section, each of the parties hereto agrees, promptly upon
the Agent's request, to execute and deliver all financing statements and
continuation statements that the Agent deems necessary or appropriate in
connection with such assignment and delegation.
Section 13.03. Participations. Any Purchaser may at any time sell to
one or more commercial banks or other financial institutions (each, a
"Participant") undivided interests in its rights in respect of any Purchases,
its portion of the Commitment or other interests or obligations of such
Purchaser hereunder;
-76-
<PAGE> 82
provided, however, that no participation contemplated in this Section shall
relieve such Purchaser from its portion of the Commitment or its other
obligations under any Facility Document and the Seller, the Master Servicer and
the Agent shall continue to deal solely and directly with such Purchaser in
connection with such Purchasers' rights and obligations under this Agreement and
each of the other Facility Documents. The Seller acknowledges and agrees that
each Participant, for purposes of Sections 3.05, 3.06, 10.03, 14.01, 15.08 and
15.09 shall be considered a Purchaser; provided, however, that no Participant
shall be entitled to payment of any amount under such Sections that would not
have been payable to the selling Purchaser had no participation occurred.
ARTICLE FOURTEEN
SELLER INDEMNITIES
Section 14.01. Indemnities by the Seller. The Seller hereby agrees to
indemnify each of the Agent, the Purchasers, their respective successors,
permitted transferees and assigns and all officers, directors, shareholders,
controlling persons, employees and agents of any of the foregoing (each, an
"Indemnified Party"), forthwith on demand, from and against any and all damages,
losses, claims (whether on account of settlements or otherwise), liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (collectively, the "Indemnified Amounts") awarded against or
incurred by any of them arising out of or as a result of any Facility Document
or the transactions contemplated thereby or the use of proceeds therefrom,
including, without limitation, in respect of the ownership of an Undivided
Interest or in respect of any Receivable or any Receivable Document, excluding,
however, Indemnified Amounts to the extent resulting from (a) nonpayment by any
Obligor of an amount due and payable with respect to a Receivable unless such
nonpayment results from a dispute, claim, offset or defense described in Section
14.01(vi) or the noncompliance with applicable laws, rules or regulations
described in Section 14.01(iii), (b) negligence or willful misconduct on the
part of such Indemnified Party or (c) disputes between assigning Purchasers and
Assignee Purchasers, or disputes between selling Purchasers and Participants, if
such disputes relate solely to the conduct of such Persons and not to the
failure of the Seller or the Master Servicer to perform any Facility Document.
Without limiting the foregoing, the Seller shall indemnify each Indemnified
Party for Indemnified Amounts relating to or resulting from:
(i) the transfer by the Seller of any interest in any
Receivable other than an Undivided Interest;
(ii) the breach of any representation or warranty made by the
Seller under or in connection with any Facility Document, any report or
settlement statement or any other information or report delivered by
the Seller or the Servicer pursuant
-77-
<PAGE> 83
thereto, which shall have been false or incorrect when made or
deemed made;
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Receivable or the related
Receivable Documents, or the nonconformity of any Receivable or the
related Receivable Documents with any such applicable law, rule or
regulation;
(iv) the failure to vest and maintain vested in the
Purchasers' ownership interests in the Undivided Interests, free and
clear of any Lien (other-than Permitted Encumbrances on the Mortgaged
Properties and any Lien arising solely as a result of an act of the
Purchasers or the Agent, whether existing at the time of the Purchase
of such Undivided Interest or at any time thereafter);
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC or
other applicable laws with respect to any Receivable, all or any part
of the Assigned Collateral whether at the time of any Purchase or at
any subsequent time;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on the
related Receivable or Receivable Documents not being the legal, valid
and binding obligations of such Obligor enforceable against it in
accordance with its respective terms), or any other claim resulting
from the sale of the services or goods related to such Receivable or
the furnishing or failure to furnish such services or goods;
(vii) any failure of the Seller, as the Servicer or
otherwise, to perform its duties or obligations in accordance with the
provisions of Article Ten; and
(viii) any Tax, all interest and penalties thereon or with
respect thereto, and all out-of-pocket costs and expenses, including
the reasonable fees and expenses of counsel in defending against the
same, which may arise by reason of the purchase or ownership of any
Undivided Interest, or other interest in the Assigned Collateral or
Facility Documents other than Taxes upon or measured by net income,
gross receipts or profits of the Indemnified Party; indemnification in
respect of any such amounts shall be in an amount necessary to make the
Indemnified Party whole after taking into account any tax consequences
to the Indemnified Party of the receipt of the indemnity provided
hereunder or of any refund of any Tax previously indemnified hereunder,
including the effect of such tax or refund on the amount of tax
measured by net income, gross receipts or profits which is or was
payable by the Indemnified Party.
-78-
<PAGE> 84
The indemnities provided herein shall survive the termination of this Agreement.
ARTICLE FIFTEEN
MISCELLANEOUS
Section 15.01. Repurchases for Administrative Convenience. If on any
Settlement Date, the Aggregate Net Investment is less than or equal to 10% of
the maximum Aggregate Net Investment on any date prior to such Settlement Date,
the Seller shall be entitled to repurchase all (but not less than all) of the
Undivided Interests from the Purchasers on such Settlement Date. To effect such
repurchase, the Seller shall give the Agent at least three Business Days, prior
written notice thereof and on the Settlement Date shall tender payment of the
repurchase price calculated as hereinafter provided. The Seller shall pay such
repurchase price in cash to the Agent (for the benefit of the Agent and the
Purchasers) in an amount equal to the sum of (i) unpaid Earned Yield on the
Aggregate Net Investment accrued to and including the date of repurchase, (ii)
the Aggregate Net Investment, (iii) accrued but unpaid Commitment Fees, (iv) all
other Obligations that are then due and payable, including, without limitation,
any Obligations which may arise under Section 3.06 as a result of such
repurchase and (v) the amount of the Servicing Fee accrued to and including the
date of repurchase (which amount shall be paid to the Master Servicer). Upon
receipt of such funds, the Purchasers shall be obligated to reconvey their
Undivided Interests and all Assigned Collateral to the Seller pursuant to an
assignment in form reasonably acceptable to the Seller, the Agent and the
Purchasers, but without representation or warranty except for a several
representation and warranty from each Purchaser that the Undivided Interests and
all Assigned Collateral assigned are free of Liens created by or arising under
such Purchaser.
Section 15.02. Substitution of Receivables. On any Settlement Date
occurring on or before the Commitment Termination Date, the Seller may remove
any Receivable that is either a Defaulted Receivable or is otherwise no longer
an Eligible Receivable; provided, however, that simultaneously with such
removal, Seller shall substitute a new Receivable which can be either a Right to
Use Receivable or a Mortgage Loan Receivable, which is an Eligible Receivable as
of the time of substitution and which has an outstanding Principal Balance equal
to or greater than the Outstanding Principal Balance of the Receivable being
removed from the Receivables Pool. After the Commitment Termination Date,
provided that no Notice Date has occurred, on any Settlement Date Seller may
remove any Receivable which is a Defaulted Receivable or which is no longer an
Eligible Receivable from the Receivables Pool; provided, however, that
simultaneously with such removal, the Seller shall substitute a new Receivable
which is an Eligible Receivable as of the time of substitution, which has a
final maturity date not later than the final maturity date of the
-79-
<PAGE> 85
Receivable being removed from the Receivables Pool and which has an Outstanding
Principal Balance equal to or greater than the Outstanding Principal Balance of
the Receivable being removed from the Receivables Pool. Any new Receivables
being substituted for Receivables being removed from the Receivables Pool shall
be separately identified on the related Settlement Statement.
Section 15.03. No Waiver; Remedies Cumulative. No failure by the Agent
or any Purchaser to exercise, and no delay in exercising, any right, power or
remedy under this Agreement or any other Facility Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
remedy under this Agreement or any other Facility Document preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The exercise of any right, power or remedy shall in no event constitute a cure
or waiver of any Unmatured Termination Event or Termination Event under this
Agreement nor prejudice the right of the Agent or any Purchaser in the exercise
of any right hereunder or under any other Facility Document. The rights and
remedies provided herein and therein are cumulative and not exclusive of any
right of remedy provided by law.
Section 15.04. Governing Law. This Agreement and the other Facility
Documents shall be governed by and construed in accordance with the internal
laws of the State of Washington except to the extent that the perfection (and
the effect of perfection or nonperfection) of the interests of the Purchasers in
all or any part of the Assigned Collateral is governed by the laws of a
jurisdiction other than the State of Washington.
Section 15.05. Notices. All demands, notices and communications under
this Agreement shall be in writing, personally delivered or mailed by certified
mail, return receipt requested, and shall be deemed to have been duly given upon
receipt in the case of:
(i) TW HOLDINGS, INC.
P.O. Box 1329
3303 Lakeport Boulevard
Klamath Falls, OR 97601
Attention: R.C. Wendt and Gary A. Florence
Telephone: (503) 882-3451
Telecopier: (503) 885-7454
(ii) JELD-WEN, inc.
3250 Lakeport Boulevard
Klamath Falls, OR 97601
Attention: R.C. Wendt and Gary A. Florence
Telephone: (503) 882-3451
Telecopier: (503) 885-7454
(iii) Seattle-First National Bank,
as Purchaser
701 Fifth Avenue
-80-
<PAGE> 86
12th Floor
Seattle, WA 98104
Attention: Gordon H. Gray
Telephone: (206) 358-3012
Telecopier: (206) 358-3113
(iv) Seattle-First National Bank,
as Agent
701 Fifth Avenue
16th Floor
Seattle, WA 98104
Attention: Ken Puro
Telephone: (206) 358-0138
Telecopier: (206) 358-0971
Any of the foregoing addresses can be changed by written notice to the other
parties to this Agreement.
Section 15.06. Severability. Any provision of this Agreement or any
other Facility Document which is prohibited or unenforceable in any jurisdiction
shall as to such jurisdiction be ineffective to the extent of such prohibition
or unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. To the extent permitted by applicable law, the parties waive any
provision of law which renders any provision hereof prohibited or unenforceable
in any respect.
Section 15.07. Entire Agreement; Amendment. This Agreement, the Fee
Letter and the other Facility Documents to which the Seller is a party comprise
the entire agreement of the parties hereto and may not be amended or modified
except by written agreement of the Seller and the Agent. No provision of this
Agreement may be waived except in writing and then only in the specific instance
and for the specific purpose for which given.
Section 15.08. Submission to Jurisdiction; Etc. Each party hereto
hereby irrevocably (a) submits to the jurisdiction of any Washington State or
United States federal court sitting in Seattle, Washington, over any action or
proceeding arising out of or relating to any Facility Document; (b) agrees that
all claims in respect to such action or proceeding may be heard and determined
in such state or United States federal court; (c) waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum to the
maintenance of such action or proceeding; (d) in the case of the Seller,
consents to the service of any and all process in any such action or proceeding
by the mailing of copies of such process to the Seller at its address provided
in Section 15:05; (e) agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law; and (f) in the case
of the Seller, agrees not to institute any legal action or proceeding against
the Agent or the Purchasers or the directors, officers, employees, agents or
-81-
<PAGE> 87
property of any thereof, arising out of or relating to any Facility Document, in
any court other than (i) any Washington state or United States federal court
sitting in Seattle, Washington or (ii) in the case of an action against a
particular Purchaser, any court sitting at the location of the Purchasers,
principal place of business. Nothing in this Section shall affect the right of
the Agent or any Purchaser to serve legal process in any other manner permitted
by law or to bring any action or proceeding against the Seller or its property
in the courts of any other jurisdiction.
Section 15.09. Waiver of Jury Trial. Each party hereto waives any right
to a trial by jury in any action or proceeding to enforce or defend any rights
under or relating to this agreement, any other Facility Document or any
amendment, instrument, document or agreement delivered or which may in the
future be delivered in connection herewith or arising from any relationship
existing in connection with this Agreement or any other Facility Document, and
agrees that (i) any such action or proceeding shall be tried before a court and
not before a jury and (ii) any party hereto may file an original counterpart or
a copy of this Agreement with any court as written evidence of the consent of
any other party or parties hereto to the waiver of its or their right to a trial
by jury.
Section 15.10. Captions and Cross-References; Incorporation by
Reference. The various captions (including, without limitation, the table of
contents) in this Agreement are included for convenience only and shall not
affect the meaning or interpretation of any provision of this Agreement.
References in this Agreement to any Section, Schedule or Exhibit are to such
Section, Schedule or Exhibit of this Agreement, as the case may be. The
Schedules and the Exhibits hereto are hereby incorporated by reference and made
a part of this Agreement.
Section 15.11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement.
Section 15.12. Confidentiality. Each party hereto agrees, insofar as it
is legally possible to do so, to use its best efforts to keep in confidence the
terms of this Agreement and all information furnished or which may hereafter be
furnished to it pursuant to the provisions of this Agreement including, without
limitation, information relating to the Receivables; provided, however, that
this Section shall not prohibit disclosure (i) to Purchasers; (ii) required or
requested by any regulatory authority having jurisdiction over such party or
otherwise required by law; (iii) of information otherwise lawfully obtainable
from other sources; (iv) to attorneys and accountants for their review in
connection with the performance of their duties; (v) to any Participant or
prospective Participant or Assignee Purchaser; or (vi) to the extent such duty
of confidentiality is waived by the applicable party hereunder.
-82-
<PAGE> 88
Section 15.13. Oral Agreements Not Enforceable. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM ENFORCING REPAYMENT
OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
TW HOLDINGS, INC.,
as Seller
By:______________________________________
Name: R.C. Wendt
Title: President
JELD-WEN, inc.,
as Master Servicer
By:______________________________________
Name: R.C. Wendt
Title: President
SEATTLE-FIRST NATIONAL BANK,
as Purchaser
By:______________________________________
Name: Gordon H. Gray
Title: Vice President
SEATTLE-FIRST NATIONAL BANK,
as Agent
By:______________________________________
Name: Ken Puro
Title: Assistant Vice President
-83-
<PAGE> 1
NONEXCLUSIVE LIMITED ASSIGNMENT
This NONEXCLUSIVE LIMITED ASSIGNMENT ("Assignment") is dated for
reference purposes September 20th, 1996 by and between TRENDWEST RESORTS, INC.,
an Oregon Corporation ("Trendwest") and EAGLE CREST PARTNERS, LTD.,
("Developer") and pertains to the Vacation Owner Program known as WORLDMARK,
THE CLUB, a California nonprofit mutual benefit corporation ("Club").
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE/SECTION PAGE
--------------- ----
<S> <C> <C>
1: RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Declarant. . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Club . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Memberships/Vacation Credits . . . . . . . . . . . . . 2
1.4 Trendwest's Rights & Powers. . . . . . . . . . . . . . 2
1.5 Definitions. . . . . . . . . . . . . . . . . . . . . . 3
2: ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.1 Annexation . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Sales Proceeds . . . . . . . . . . . . . . . . . . . . 3
2.3 Resales. . . . . . . . . . . . . . . . . . . . . . . . 3
3: DEVELOPER DUTIES AND ASSUMPTION. . . . . . . . . . . . . . . 3
3.1 Club Assessments . . . . . . . . . . . . . . . . . . . 4
3.2 Declaration. . . . . . . . . . . . . . . . . . . . . . 4
3.3 Property Expenses. . . . . . . . . . . . . . . . . . . 4
3.4 Sales Expenses . . . . . . . . . . . . . . . . . . . . 4
3.5 Trendwest Fee. . . . . . . . . . . . . . . . . . . . . 4
3.6 Compliance . . . . . . . . . . . . . . . . . . . . . . 4
3.7 Legal Review . . . . . . . . . . . . . . . . . . . . . 4
3.8 Sales Regulation . . . . . . . . . . . . . . . . . . . 4
3.9 Land Use Regulation. . . . . . . . . . . . . . . . . . 4
3.10 Construction and Improvements. . . . . . . . . . . . . 5
3.11 Representations and Warranties . . . . . . . . . . . . 5
3.12 Further Interest . . . . . . . . . . . . . . . . . . . 5
3.13 Limited Authority. . . . . . . . . . . . . . . . . . . 5
3.14 Complaints . . . . . . . . . . . . . . . . . . . . . . 6
3.15 Defaults and Remedies. . . . . . . . . . . . . . . . . 6
4: TRENDWEST SERVICES AND DUTIES. . . . . . . . . . . . . . . . 6
4.1 Inspection and Approval. . . . . . . . . . . . . . . . 6
4.2 Allocation of Vacation Credits . . . . . . . . . . . . 6
4.3 Sales Regulation . . . . . . . . . . . . . . . . . . . 6
4.4 No Supervision . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Article/Section Page
--------------- ----
<S> <C> <C>
5: GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . 6
5.1 Assignment . . . . . . . . . . . . . . . . . . . 6
5.2 Amendment. . . . . . . . . . . . . . . . . . . . 7
5.3 Assignment . . . . . . . . . . . . . . . . . . . 7
5.4 Attorney's Fees . . . . . . . . . . . . . . . . 7
5.5 Entire Agreement . . . . . . . . . . . . . . . . 7
5.6 Headings . . . . . . . . . . . . . . . . . . . . 7
5.7 Hold Harmless and Indemnity . . . . . . . . . . 7
5.8 Law Applicable . . . . . . . . . . . . . . . . . 8
5.9 Legal Effects and Return . . . . . . . . . . . . 8
5.10 Notices . . . . . . . . . . . . . . . . . . . . 8
5.11 Severability . . . . . . . . . . . . . . . . . . 8
5.12 Successors . . . . . . . . . . . . . . . . . . . 8
5.13 Survival . . . . . . . . . . . . . . . . . . . . 8
5.14 Termination . . . . . . . . . . . . . . . . . . 8
5.15 Waiver . . . . . . . . . . . . . . . . . . . . . 9
5.16 Word Usage . . . . . . . . . . . . . . . . . . . 9
5.17 Exhibits . . . . . . . . . . . . . . . . . . . . 9
6: SIGNATURES . . . . . . . . . . . . . . . . . . . . . . 9
Consent (Of Club) . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
1: RECITALS. The following Recitals are acknowledged and agreed to
by the parties.
1.1 Declarant. Trendwest is the founder of the Club and the
Declarant under the "Declaration of Vacation Owner Program (WorldMark, The
Club)" ("Declaration") recorded for each Property annexed to the Club and
dedicated to the Vacation Owner Program. Trendwest is also the Manager of the
Club under a Management Agreement dated February 13, 1991.
1.2 Club. The Club is an association of the owners of Memberships
in the Club and the owner or lessee of the various Property to be available to
its Members for resort and recreational use pursuant to the Club Governing
Documents. The Club was formerly known as CLUB ESPRIT.
1.3 Memberships/Vacation Credits. Memberships in Club are sold by
Trendwest to the general public in the form of Vacation Credits, which are
allocated to each Property based on its relative value as a resort in the Club
Vacation Owner Program. A Membership is in perpetuity or for a prescribed term
of years, and constitutes a vacation license, which means a right to use and
occupy Units in the Property available through Club from time to time,
according to the reservation rules.
1.4 Trendwest's Rights and Powers. Under the Declaration Trendwest
has the right to annex additional Property to the Club and to sell for its own
account the Vacation Credits allocated to each Property.
<PAGE> 3
1.5 Definitions. Unless the context otherwise requires, the
definitions set forth in the most recently recorded Declaration are hereby
adopted as the definitions herein.
2: ASSIGNMENT. Trendwest hereby assigns to Developer, on a
nonexclusive basis and specifically limited as expressed herein, the following
rights and powers:
2.1 Annexation. Developer may annex to Club the Property described
on Exhibit One attached hereto by conveying or directing conveyance of
marketable fee title in the Property to the Club free of all liens, charges and
encumbrances other than customary restrictions relating to condominiums and
easements for ingress and egress and utilities. Future annexations may be
conveyed to the Club by the written agreement of Running Y and Trendwest in a
form as set forth in Exhibit Two ("Addendum to Nonexclusive Limited
Assignment"). Trendwest reserves the absolute right, in its sole discretion, to
reject the annexation of any property from Developer to the Club. All property
annexed to Club pursuant to this Agreement shall be referred to as the
"Developer Property." Title insurance shall be provided at Developer's expense.
The title policy to be issued shall contain no exceptions other than the
General Exclusions and Exceptions in a standard form title policy and Special
Exceptions consistent with the condition of title. Title shall be conveyed by
Statutory Warranty Deed. All costs of closing, including title insurance,
escrow fees, real estate excise tax, or any other taxes or fees shall be paid
by Developer.
2.2 Right to sell Vacation Credits. Trendwest hereby grants to
Developer the non-exclusive right to market and sell Vacation Credits, subject
to the terms and conditions of this Agreement. Developer may sell for its
own account and retain all of the gross proceeds from the sale of the Vacation
Credits allocated to the Developer Property, subject to payment of the fee set
forth in Section 3.5. Under no circumstances shall Developer sell more Vacation
Credits than have been allocated to the Developer Property.
2.3 Resales. Developer shall be entitled to resell Vacation Credits
originally sold by it if they are repossessed by the Club or by Developer and
still subject to a purchase money security interest in Developer, subject to
reimbursement to the Club for amounts owed to the Club pursuant to such Vacation
Credits. Following expiration of any purchase money security interest in
Developer, Developer has no interest in or claim against such Vacation Credits.
3.: DEVELOPER DUTIES AND ASSUMPTION. Developer hereby assumes the
duties and obligations associated with the limited assignment of rights herein,
specifically, but not limited to, the following:
<PAGE> 4
3.1 Club Assignments. Developer shall pay to Club all assessments
and other charges levied pursuant to the Club Governing Documents as to all
unsold Vacation Credits allocated to the Developer Property for which Developer
has an interest in the sales proceeds, whether or not yet sold or repossessed.
3.2 Declaration. Developer shall record a Declaration with the Club
as Co-Developer, substantially similar to the Declarations recorded by
Trendwest.
3.3 Property Expenses. Developer shall be solely responsible for
all costs and expenses associated with acquisition, construction, remodeling,
furnishing, inspection, appraisal and/or conveying the Developer Property.
3.4 Sales Expenses. Developer shall be solely responsible for all
costs and expenses associated with marketing and selling the Vacation Credits
allocated to the Developer Property, including the costs of advertising and
preparing and printing sales documents and copies of the Governing Documents.
3.5 Trendwest Fee. For its services under and for making this
Assignment, Trendwest shall receive from Developer a fee of three percent (3%)
of the selling price of the Vacation Credits allocated to the Developer
Property, to be paid within twenty (20) days after the month in which the sale
of the Vacation Credits was made.
3.6 Compliance. Developer shall conform its Declaration, sales
documents, representations and relations with Club Members and prospective
Members to the Club Governing Documents and to all applicable laws, ordinances
and regulations.
3.7 Legal Review. If requested by Trendwest, Developer shall obtain
at its own expense and by legal counsel reasonably acceptable to Trendwest,
legal review of its sales and consumer documentation, advertising, and
regulatory filings.
3.8 Sales Regulation. Developer shall, at its own expense, comply
completely with, all Federal, state and local subdivision or timeshare sales
regulatory and consumer protection laws, regulations and ordinances, relating
to the annexed property. The Club may join with Developer in its regulatory
filings. Developer shall also pay all direct expenses for registering the
Developer Property in all jurisdictions where the Club is registered by
Trendwest, even if Developer is not selling or advertising there. Such costs
shall include, but not be limited to, filing fees, appraisal and inspection
fees. (See sec. 4.3)
3.9 Land use regulation. Prior to conveyance to the Club, Developer
shall obtain any clearances or permits necessary to allow the use of the
Developer Property as a Club Property.
<PAGE> 5
3.10 Construction and Improvements. Developer shall complete all
construction, remodeling, improvements and interior furnishing of the Developer
Property, subject to the specifications required by Trendwest, prior to
conveyance to the Club.
3.11 Representations and Warranties of Developer. With respect to any
Developer Property, Developer hereby represents and warrants to Trendwest and
the Club as follows:
a. Compliance with Environmental Laws. Neither the Developer nor any
person (including any previous owner, lessee, sublessor or sublessee) has
generated, handled, used, manufactured, processed, distributed in commerce,
transported, treated, stored, disposed, released (or arranged for the
transportation, treatment or disposal) of petroleum products, hazardous waste,
hazardous chemicals or substances, toxic chemicals, chemical substances or
mixtures, pollutants or contaminants on, at or from the Developer Property, or
any other assets or properties owed, leased or subleased or used by the
Developer in the operation of its business or on, at or from any real property
to which any of the above-listed substances from the above-listed assets or
properties were transported, or at or on which they were treated or disposed
that could subject the Developer, Trendwest or the Club to liability under any
provision of law, including without limitation, federal, state, local or common
law, in each case as in existence on or after the date the Developer Property
is annexed to the Club.
b. Construction Quality. The Developer Property has been built in
accordance with the plans and specifications approved by Trendwest, and has
been constructed in accordance with all applicable building, fire and
electrical codes and all other governmental regulations applicable to the
Developer Property. All work done in construction of the Developer Property was
completed in a good and workmanlike manner and all materials utilized in such
construction were of good quality. To the best knowledge of the Developer, the
Developer Property is free of any and all material defects.
3.12 No Further Interest. Developer acknowledges that after
conveyance of the Developer Property to the Club, Developer shall have no claim
or interest in the Developer Property, except as may be provided in this
Assignment, and no further claim or interest in Vacation Credits sold by it
after expiration of Developer's purchase money security interest therein.
3.13 Limited Authority. Developer shall not represent or purport to
bind the Club other than through the sale or resale of Vacation Credits in the
ordinary course of business in conformity with the Club Governing Documents.
Developer shall not use the tradename or any service mark of the Club other
than in connection with the sale of Vacation Credits allocated by the
5
<PAGE> 6
Club to the Developer Property. Developer shall not use Trendwest's name in any
manner, except as it may appear in the Club Governing Documents.
3.14 Complaints. Developer shall notify Club in writing within five
business days of becoming aware of a material complaint or dissatisfaction by a
Club Member, and deliver to Club therewith any written complaint or
correspondence from a Club member pertaining to a complaint or dissatisfaction.
The Club is solely responsible for Member relations, but Developer agrees to
assist Club, at Club's reasonable request and direction, in resolving complaints
and dissatisfaction of Members who purchase Vacation Credits from Developer.
3.15 Defaults and Remedies. Upon the commission of a material
default under this Assignment, or upon the failure to timely pay any amount
required to be paid or reimbursed hereunder, Club may suspend the right of
Developer to sell Vacation Credits until such time as the default or failure to
pay is cured.
4: TRENDWEST DUTIES.
4.1 Inspection and Approval. Trendwest, as Manager of the Club, must
inspect and reasonably approve the quality and harmony of the Developer Property
as Club Property regarding, but not limited to, design, size, location,
amenities (interior, project, and surrounding area) and quality of construction,
which approval must be given in writing prior to conveyance to the Club.
4.2 Allocation of Vacation Credits. Trendwest, as Manager of the
Club, will determine the allocation of Vacation Credits on the same bases as
Vacation Credits are allocated to Property annexed by Trendwest to the Club.
4.3 Sales Regulation. Trendwest will be responsible (but at
Developer's expense) for registering the Developer Property as part of the Club
offering in all states where the Club is registered by Trendwest.
4.4 No Supervision. Trendwest shall have no right, power or
obligation to assist, supervise or control financial terms, manner or means by
which Developer develops the Developer Property.
5. GENERAL PROVISIONS.
5.1 Agency. Nothing in this Assignment shall be construed as
constituting a partnership between, or joint venture by, the parties hereto, or
constitute either party the agent or employee of the other.
6
<PAGE> 7
5.2 Amendment. No supplement, modification, or amendment of this
Assignment shall be binding unless in a writing executed by each of the
parties.
5.3 Assignment. This Assignment is personal between the parties,
and neither party may sell, assign, transfer, or hypothecate any rights or
interests created under this Assignment without the express written consent of
the other party. Any purported sale, assignment, transfer, or hypothecation of
any such rights or interests of any party without such consent shall be void.
5.4 Attorneys' Fees. Upon a material default or commission of a
tort hereunder by one party, the other party shall be entitled to attorney fees
and costs reasonably incurred in connection with such default or tort, whether
or not legal or arbitration proceedings are undertaken. Should any action or
proceeding be commenced between the parties hereto concerning this Assignment
or their rights and duties hereunder, the party prevailing in such action or
proceeding shall be entitled to actual attorneys' fees and costs in such action
or proceeding. Each party shall bear its own costs, expenses, and attorney fees
incurred in negotiating, preparing, and signing this Assignment.
5.5 Entire Agreement. This Assignment, the Club Governing
Documents, and all documents signed at the same time and/or specifically
referred to herein constitute the complete, exclusive and final expression of
the agreement between the parties pertaining to the subject matter contained
herein, and no party has made or relied on any oral representations or
assurances not contained herein. This Assignment supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties;
and it may not be contradicted by evidence of any prior or contemporaneous
agreement. No extrinsic evidence whatsoever may be introduced in any proceeding
concerning the terms of this Assignment. There is no representation or
inference that Developer will be able to annex additional Property to the Club.
5.6 Headings. The paragraph or section headings or titles in this
Assignment are for convenience and reference only and do not in any way modify,
interpret, or construe the intent of the parties or affect any of the
provisions of this Assignment.
5.7 Hold Harmless and Indemnity. Each of the parties agrees to hold
the other party harmless and indemnify the other party from and against any and
all loss, cost, damage or liability which the other party may incur or sustain
as a result of any action by such party or for any breach by such party of any
warranty or representation contained in this Assignment, or for any
misrepresentation or material omission in the representations herein, or for any
violation of any applicable law, ordinance or regulation, whether by neglect or
willful act
7
<PAGE> 8
and whether by a party or its agents, contractors, or employees. Such
indemnification shall include, among other costs, administrative costs, civil
penalties, attorneys' fees and costs of appeal, settlement or defense, and the
obligation to undertake or assume the defense of any claim.
5.8 Law Applicable. This Assignment and its interpretation,
construction, and enforcement, shall be governed by the laws of the State of
Oregon.
5.9 Legal Effects and Return. No representation, warranty or
recommendation is made by any party or its respective agent or attorney
regarding the legal sufficiency or effect, financial return, or tax
consequences of any transaction contemplated under this Assignment to any
individual or specific entity, and each party acknowledges it has been advised
to submit this Assignment to independent legal counsel before signing it. There
shall be no presumption in favor of or against any party with regard to which
party arranged for initial drafting of this Assignment.
5.10 Notices. Any notice required or desired to be given hereunder
shall be deemed given if personally delivered, properly sent by facsimile
transmission, or ninety-six (96) hours after mailing (first class postage
prepaid, return receipt requested), to the parties at the following addresses,
or at such other addresses as may be given by proper notice:
5.10(a) TRENDWEST: TRENDWEST RESORTS, INC., 12301 N.E. 10th
Pl., Bellevue, Washington 98005; facsimile transmittal (206) 990-2302.
5.10(b) DEVELOPER: EAGLE CREST PARTNERS, LTD., 821 S. 6th St.,
Redmond, OR 97756; facsimile transmittal (503) 923-0881.
5.11 Severability. If any provision of this Assignment is held to
be unenforceable, invalid or illegal by any arbitrator or court of competent
jurisdiction, such shall not affect the remainder of this Assignment.
5.12 Successors. Subject to Section 5.3 regarding assignment, this
Assignment shall be binding upon and benefit the heirs, legal representatives,
successors, and assigns of the parties.
5.13 Survival. All provisions, covenants and warranties hereunder
shall survive the conveyance of the Developer Property to the Club.
5.14 Termination. This Agreement shall be terminable by either party
within thirty (30) days of written notice given to the other party by certified
mail, return receipt requested directed to the address set forth in paragraph
5.10 above, as amended.
8
<PAGE> 9
5.15 Waiver. No waiver of enforcement or breach of any of the
provisions of this Assignment shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless in writing and signed by
the person making the wavier.
5.16 Word Usage. Unless the context clearly otherwise requires, (a)
the plural and singular numbers or the masculine, feminine and neuter genders
shall each be deemed to include the others; (b) "shall", "will", or "agrees"
are mandatory, and "may" is permissive; (c) "or" is not exclusive; and (d)
"including" is not limiting.
5.17 Exhibit. The following Exhibits are attached hereto and
incorporated herein by this reference:
Exhibit One - DEVELOPER PROPERTY DESCRIPTION
Exhibit Two - ADDENDUM TO NONEXCLUSIVE LIMITED ASSIGNMENT
6: SIGNATURES. The individuals applying their signatures to this
Assignment warrant that they are signing for themselves individually, or if
signing in a representative capacity for a person or entity whose name is set
forth immediately above their signature, and that they have been expressly
authorized to sign the Assignment on behalf of such person or entity.
Signed effective the date first above written.
TRENDWEST: DEVELOPER:
TRENDWEST RESORTS, INC., an EAGLE CREST PARTNERS, LTD.,
Oregon Corporation an Oregon Corporation
By /s/ WILLIAM F. PEARE By /s/ JERRY ANDRES
------------------------ ------------------------
William F. Peare, President Jerry Andres, President
9
<PAGE> 10
EXHIBIT ONE
- --------------------------------------------------------------------------------
DEVELOPER PROPERTY DESCRIPTION
- --------------------------------------------------------------------------------
That certain real Property located in the County of Deschutes, State of Oregon
described as follows:
- --------------------------------------------------------------------------------
Lot 47, River View Vista Estates Plat IV, recorded December 3, 1992 in the
office of the County Recorder, Deschutes County, Oregon, and all improvements
located thereon;
- --------------------------------------------------------------------------------
Units 6402, 6404, 6405, 6406, 6502, 6503, 6504, 6505, 6506, 6601, 6602, 6603,
6604, 6605, and 6606 of EAGLE CREST at RIDGE HAWK, a CONDOMINIUM, together with
the general and limited common elements pertaining thereto, as provided in the
Declaration Submitting Stage 1 of EAGLE CREST at RIDGE HAWK to Condominium
Ownership, recorded October 12, 1995, in the Official Records of Deschutes
County Recorder, Oregon as Book 387, Page 2015. The land included within such
property is described in Exhibit A to the Declaration and such description is
incorporated herein by reference. The limited common elements pertaining to
such unit consist of the decks and storage closet adjoining such unit.
- --------------------------------------------------------------------------------
Units, 3301, 3302, 3303, 3304, 3305, 3306, 3307, 3309, 3310, 3311, 3312, 3313,
3314, 3315, 3316, 3317, 3318, 3319, 3320, 3322, 3323, 3324, 3225, 3326, 3327,
3328, 3329, 3330, 3331, 3332, 3334 and 3336 of STAGE 1 OF EAGLE CREST HOTEL
CONDOMINIUMS, together with the general and limited common elements pertaining
thereto, as provided in the Declaration Submitting STAGE 1 OF EAGLE CREST HOTEL
CONDOMINIUMS to Condominium Ownership, recorded November 29, 1995, in the
records of Deschutes County, Oregon, as Book 392, Page 869. The land included
within such property is described in Exhibit "A" to the Declaration and such
description is incorporated herein by reference. The limited common elements
pertaining to such units consist of the decks, corridors, laundry room and club
room adjoining such units.
- --------------------------------------------------------------------------------
<PAGE> 11
EXHIBIT TWO
ADDENDUM TO
NONEXCLUSIVE LIMITED ASSIGNMENT
This Addendum is to the Nonexclusive Limited Assignment between
Trendwest Resorts and Eagle Crest Properties dated September 20, 1996.
This Addendum is made pursuant to the Annexation section of that
Assignment (Sec. 2.1). It is agreed between Trendwest Resorts and Eagle Crest
Properties that the following described property shall be annexed into
WorldMark, The Club under the terms of the above referenced assignment.
That certain real property located in the County of Deschutes, Oregon,
described as follows: Condominiums ______, inclusive, as set forth on
that certain plan entitled "Condominium Plan of __________________
Condominiums" ("Plan") consisting of ____________ (___) sheets recorded
on _____________, 19__, in Book ______ of Maps at pages _______,
____________________________ County Records, _________, which constitute
a condominium plan for the _________________ Condominium Project
("Project"), which is located on the land described as Parcel ______ as
shown on the "Final Map of ____________________ ("Map") consisting of
_______________ (___) sheets recorded on _______________, 19__, in Book
______ of Maps at Pages ______, _________________________ County
Records, _________________.
The persons applying their signatures to this Addendum are signing in a
representative capacity for the entity whose name is set forth immediately
above their signature, and that they have been expressly authorized to sign the
Addendum on behalf of such entity.
TRENDWEST RESORTS: EAGLE CREST PROPERTIES:
TRENDWEST RESORTS, INC., an EAGLE CREST PROPERTIES, INC.,
Oregon corporation an Oregon corporation
By By
--------------------------- ----------------------------
William F. Peare, President Jerry Andres, President
<PAGE> 12
ADDENDUM TO
NONEXCLUSIVE LIMITED ASSIGNMENT
This Addendum is to the Nonexclusive Limited Assignment between
Trendwest Resorts and Eagle Crest, Inc., formerly Eagle Crest Partners, Ltd.,
dated September 20, 1996.
This Addendum is made pursuant to the Annexation section of that
Assignment (Sec. 2.1). It is agreed between Trendwest Resorts and Eagle Crest
Properties that the following described property shall be annexed into
WorldMark, The Club under the terms of the above referenced assignment.
That certain real property located in the County of Deschutes, State of
Oregon, described as follows:
Lot 65, of Eagle Crest II - Phase 1 recorded March 28, 1996 in the
Official Records of Deschutes County Recorder, and all improvements
located thereon; located in County of Deschutes, State of Oregon.
Units 6401, 6403 and 6501 of EAGLE CREST at RIDGE HAWK, a CONDOMINIUM,
together with the general and limited common elements pertaining
thereto, as provided in the Declaration Submitting Stage 1 of EAGLE
CREST at RIDGE HAWK to Condominium Ownership, recorded October 12, 1995,
in the Records of Deschutes County, Oregon as Book 387, Page 2015. The
land included within such property is described in Exhibit A to the
Declaration and such description is incorporated herein by reference.
The limited common elements pertaining to such unit consist of the decks
and storage closet adjoining such unit.
The persons applying their signatures to this Addendum are signing in a
representative capacity for the entity whose name is set forth immediately above
their signature, and that they have been expressly authorized to sign the
Addendum on behalf of such entity.
TRENDWEST RESORTS: EAGLE CREST, INC.:
TRENDWEST RESORTS, INC., an EAGLE CREST, INC.,
Oregon corporation an Oregon corporation
By /s/ WILLIAM F. PEARE By /s/ JERRY ANDRES
---------------------------- ----------------------------
William F. Peare, President Jerry Andres, President
<PAGE> 1
NONEXCLUSIVE LIMITED ASSIGNMENT
This NONEXCLUSIVE LIMITED ASSIGNMENT ("Assignment") is dated for
reference purposes September 20, 1996 by and between TRENDWEST RESORTS, INC.,
an Oregon corporation ("Trendwest") and RUNNING Y, INC., ("Developer") and
pertains to the Vacation Owner Program known as WORLDMARK, THE CLUB, a
California nonprofit mutual benefit corporation ("Club").
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Article/Section Page
- --------------- ----
<S> <C> <C>
1: RECITALS.................................................... 2
1.1 Declarant........................................... 2
1.2 Club................................................ 2
1.3 Memberships/Vacation Credits........................ 2
1.4 Trendwest's Rights & Powers......................... 2
1.5 Definitions......................................... 3
2: ASSIGNMENT.................................................. 3
2.1 Annexation.......................................... 3
2.2 Sales Proceeds...................................... 3
2.3 Resales............................................. 3
3: DEVELOPER DUTIES AND ASSUMPTION............................. 3
3.1 Club Assessments.................................... 4
3.2 Declaration......................................... 4
3.3 Property Expenses................................... 4
3.4 Sales Expenses...................................... 4
3.5 Trendwest Fee....................................... 4
3.6 Compliance.......................................... 4
3.7 Legal Review........................................ 4
3.8 Sales Regulation.................................... 4
3.9 Land Use Regulation................................. 4
3.10 Construction and Improvements....................... 5
3.11 Representations and Warranties...................... 5
3.12 Further Interest.................................... 5
3.13 Limited Authority................................... 5
3.14 Complaints.......................................... 5
3.15 Defaults and Remedies............................... 5
4: TRENDWEST SERVICES AND DUTIES............................... 6
4.1 Inspection and Approval............................. 6
4.2 Allocation of Vacation Credits...................... 6
4.3 Sales Regulation.................................... 6
4.4 No Supervision...................................... 6
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
Article/Section PAGE
--------------- ----
<S> <C> <C>
5: GENERAL PROVISIONS...................................... 6
5.1 Assignment...................................... 6
5.2 Amendment....................................... 7
5.3 Assignment...................................... 7
5.4 Attorney's Fees................................. 7
5.5 Entire Agreement................................ 7
5.6 Headings........................................ 7
5.7 Hold Harmless and Indemnity..................... 7
5.8 Law Applicable.................................. 8
5.9 Legal Effects and Return........................ 8
5.10 Notices......................................... 8
5.11 Severability.................................... 8
5.12 Successors...................................... 8
5.13 Survival........................................ 8
5.14 Termination..................................... 8
5.15 Waiver.......................................... 9
5.16 Word Usage...................................... 9
5.17 Exhibits........................................ 9
6: SIGNATURES.............................................. 9
CONSENT (Of Club)............................................... 10
</TABLE>
1: RECITALS. The following Recitals are acknowledged and agreed to by the
parties.
1.1 Declarant. Trendwest is the founder of the Club and the
Declarant under the "Declaration of Vacation Owner Program (WorldMark, The
Club)" ("Declaration") recorded for each Property annexed to the Club and
dedicated to the Vacation Owner Program. Trendwest is also the Manager of the
Club under a Management Agreement dated February 13, 1991.
1.2 Club. The Club is an association of the owners of Memberships
in the Club and the owner or lessee of the various Property to be available to
its Members for resort and recreational use pursuant to the Club Governing
Documents. The Club was formerly known as CLUB ESPRIT.
1.3 Memberships/Vacation Credits. Memberships in Club are sold by
Trendwest to the general public in the form of Vacation Credits, which are
allocated to each Property based on its relative value as a resort in the Club
Vacation Owner Program. A Membership is in perpetuity or for a prescribed term
of years, and constitutes a vacation license, which means a right to use and
occupy Units in the Property available through Club from time to time,
according to the reservation rules.
1.4 Trendwest's Rights and Powers. Under the Declaration Trendwest
has the right to annex additional Property to the Club and to sell for its own
account the Vacation Credits allocated to each Property.
<PAGE> 3
1.5 Definitions. Unless the context otherwise requires, the
definitions set forth in the most recently recorded Declaration are hereby
adopted as the definitions herein.
2: ASSIGNMENT. Trendwest hereby assigns to Developer, on a
nonexclusive basis and specifically limited as expressed herein, the following
rights and powers:
2.1 Annexation. Developer may annex to Club the Property described
on Exhibit One attached hereto by conveying or directing conveyance of
marketable fee title in the Property to the Club free of all liens, charges and
encumbrances other than customary restrictions relating to condominiums and
easements for ingress and egress and utilities. Future annexations may be
conveyed to the Club by the written agreement of Running Y and Trendwest in a
form as set forth in Exhibit Two ("Addendum to Nonexclusive Limited
Assignment"). Trendwest reserves the absolute right, in its sole discretion, to
reject the annexation of any property from Developer to the Club. All property
annexed to Club pursuant to this Agreement shall be referred to as the
"Developer Property." Title insurance shall be provided at Developer's expense.
The title policy to be issued shall contain no exceptions other than the
General Exclusions and Exceptions in a standard form title policy and Special
Exceptions consistent with the condition of title. Title shall be conveyed by
Statutory Warrant Deed. All costs of closing, including title insurance, escrow
fees, real estate excise tax, or any other taxes or fees shall be paid by
Developer.
2.2 Right to sell Vacation Credits. Trendwest hereby grants to
Developer the non-exclusive right to market and sell Vacation Credits, subject
to the terms and conditions of this Agreement. Developer may sell for its own
account and retain all of the gross proceeds from the sale of the Vacation
Credits allocated to the Developer Property, subject to payment of the fee set
forth in Section 3.5. Under no circumstances shall Developer sell more Vacation
Credits than have been allocated to the Developer Property.
2.3 Resales. Developer shall be entitled to resell Vacation Credits
originally sold by it if they are repossessed by the Club or by Developer and
still subject to a purchase money security interest in Developer, subject to
reimbursement to the Club for amounts owed to the Club pursuant to such
Vacation Credits. Following expiration of any purchase money security interest
in Developer, Developer has no interest in or claim against such Vacation
Credits.
3: DEVELOPER DUTIES AND ASSUMPTION. Developer hereby assumes the
duties and obligations associated with the limited assignment of rights herein,
specifically, but not limited to, the following:
<PAGE> 4
3.1 Club Assessments. Developer shall pay to Club all assessments
and other charges levied pursuant to the Club Governing Documents as to all
unsold Vacation Credits allocated to the Developer Property for which Developer
has an interest in the sales proceeds, whether not yet sold or repossessed.
3.2 Declaration. Developer shall record a Declaration with the Club
as Co-Developer, substantially similar to the Declarations recorded by
Trendwest.
3.3 Property Expenses. Developer shall be solely responsible for
all costs and expenses associated with acquisition, construction, remodeling,
furnishing, inspection, appraisal and/or conveying the Developer Property.
3.4 Sales Expenses. Developer shall be solely responsible for all
costs and expenses associated with marketing and selling the Vacation Credits
allocated to the Developer Property, including the costs of advertising and
preparing and printing sales documents and copies of the Governing Documents.
3.5 Trendwest Fee. For its services under and for making this
Assignment, Trendwest shall receive from Developer a fee of three percent (3%)
of the selling price of the Vacation Credits allocated to the Developer
Property, to be paid within twenty (20) days after the month in which the sale
of the Vacation Credits was made.
3.6 Compliance. Developer shall conform its Declaration, sales
documents, representations and relations with Club Members and prospective
Members to the Club Governing Documents and to all applicable laws, ordinances
and regulations.
3.7 Legal Review. If requested by Trendwest, Developer shall obtain
at its own expense and by legal counsel reasonably acceptable to Trendwest,
legal review of its sales and consumer documentation, advertising, and
regulatory filings.
3.8 Sales Regulation. Developer shall, at its own expense, comply
completely with, all Federal, state and local subdivision or timeshare sales
regulatory and consumer protection laws, regulations and ordinances, relating
to the annexed property. The Club may join with Developer in its regulatory
filings. Developer shall also pay all direct expenses for registering the
Developer Property in all jurisdictions where the Club is registered by
Trendwest, even if Developer is not selling or advertising there. Such costs
shall include, but not be limited to, filing fees, appraisal and inspection
fees. (See sec. 4.3)
3.9 Land use regulation. Prior to conveyance to the Club, Developer
shall obtain any clearances or permits necessary to allow the use of the
Developer Property as a Club Property.
<PAGE> 5
3.10 Construction and Improvements. Developer shall complete all
construction, remodeling, improvements and interior furnishing of the Developer
Property, subject to the specifications required by Trendwest, prior to
conveyance to the Club.
3.11 Representations and Warranties of Developer. With respect to
any Developer Property, Developer hereby represents and warrants to Trendwest
and the Club as follows:
a. Compliance with Environmental Laws. Neither the Developer nor any
person (including any previous owner, lessee, sublessor or sublessee) has
generated, handled, used, manufactured, processed, distributed in commerce,
transported, treated, stored, disposed, released (or arranged for the
transportation, treatment or disposal) of petroleum products, hazardous waste,
hazardous chemical or substances, toxic chemicals, chemical substances or
mixtures, pollutants or contaminants on, at or from the Developer Property, or
any other assets or properties owed, leased or subleased or used by the
Developer in the operation of its business or on, at or from any real property
to which any of the above-listed substances from the above-listed assets or
properties were transported, or at or on which they were treated or disposed
that could subject the Developer, Trendwest or the Club to liability under any
provision of law, including without limitation, federal, state local or common
law, in each case as in existence on or after the date the Developer Property
is annexed to the Club.
b. Construction Quality. The Developer Property has been built in
accordance with the plans and specifications approved by Trendwest, and has
been constructed in accordance with all applicable building, fire and
electrical codes and all other governmental regulations applicable to the
Developer Property. All work done in construction of the Developer Property was
completed in a good and workmanlike manner and all materials utilized in such
construction were of good quality. To the best knowledge of the Developer, the
Developer Property is free of any and all material defects.
3.12 No Further Interest. Developer acknowledges that after
conveyance of the Developer Property to the Club, Developer shall have no claim
or interest in the Developer Property, except as may be provided in this
Assignment, and no further claim or interest in Vacation Credits sold by it
after expiration of Developer's purchase money security interest therein.
3.13 Limited Authority. Developer shall not represent or purport to
bind the Club other than through the sale or resale of Vacation Credits in the
ordinary course of business in conformity with the Club Governing Documents.
Developer shall not use the tradename or any service mark of the Club other than
in connection with the sale of Vacation Credits allocated by the
5
<PAGE> 6
Trendwest's name in any manner, except as it may appear in the Club Governing
Documents.
3.14 Complaints. Developer shall notify Club in writing within five
business days of becoming aware of a material complaint or dissatisfaction by a
Club Member, and deliver to Club therewith any written complaint or
correspondence from a Club Member pertaining to a complaint or dissatisfaction.
The Club is solely responsible for Member relations, but Developer agrees to
assist Club, at Club's reasonable request and direction, in resolving
complaints and dissatisfaction of Members who purchase Vacation Credits from
Developer.
3.15 Defaults and Remedies. Upon the commission of a material
default under this Assignment, or upon the failure to timely pay any amount
required to be paid or reimbursed hereunder, Club may suspend the right of
Developer to sell Vacation Credits until such time as the default or failure to
pay is cured.
4: TRENDWEST DUTIES.
4.1 Inspection and Approval. Trendwest, as Manager of the Club,
must inspect and reasonably approve the quality and harmony of the Developer
Property as Club Property regarding, but not limited to, design, size,
location, amenities (interior, project, and surrounding area) and quality of
construction, which approval must be given in writing prior to conveyance to
the Club.
4.2 Allocation of Vacation Credits. Trendwest, as Manager of the
Club, will determine the allocation of Vacation Credits on the same bases as
Vacation Credits are allocated to Property annexed by Trendwest to the Club.
4.3 Sales Regulation. Trendwest will be responsible (but at
Developer's expense) for registering the Developer Property as part of the Club
offering in all states where the Club is registered by Trendwest.
4.4 No Supervision. Trendwest shall have no right, power or
obligation to assist, supervise or control financial terms, manner or means by
which Developer develops the Developer Property.
5: GENERAL PROVISIONS.
5.1 Agency. Nothing in this Assignment shall be construed as
constituting a partnership between, or joint venture by, the parties hereto, or
constitute either party the agent or employee of the other.
6
<PAGE> 7
5.2 Amendment. No supplement, modification or amendment of this
Assignment shall be binding unless in a writing executed by each of the parties.
5.3 Assignment. This Assignment is personal between the parties,
and neither party may sell, assign, transfer, or hypothecate any rights or
interests created under this Assignment without the express written consent of
the other party. Any purported sale, assignment, transfer, or hypothecation of
any such rights or interests of any party without such consent shall be void.
5.4 Attorneys' Fees. Upon a material default or commission of a
tort hereunder by one party, the other party shall be entitled to attorney fees
and costs reasonably incurred in connection with such default or tort, whether
or not legal or arbitration proceedings are undertaken. Should any action or
proceeding be commenced between the parties hereto concerning this Assignment
or their rights and duties hereunder, the party prevailing in such action or
proceeding shall be entitled to actual attorneys' fees and costs in such action
or proceeding. Each party shall bear its own costs, expenses, and attorney
fees incurred in negotiating, preparing, and signing this Assignment.
5.5 Entire Agreement. This Assignment, the Club Governing
Documents, and all documents signed at the same time and/or specifically
referred to herein constitute the complete, exclusive and final expression of
the agreement between the parties pertaining to the subject matter contained
herein, and no party has made or relied on any oral representations or
assurances not contained herein. This Assignment supersedes all prior and
contemporaneous agreements, representations, and understandings of the parties;
and it may not be contradicted by evidence of any prior or contemporaneous
agreement. No extrinsic evidence whatsoever may be introduced in any
proceeding concerning the terms of this Assignment. There is no representation
or inference that Developer will be able to annex additional Property to the
Club.
5.6 Headings. The paragraph or section headings or titles in this
Assignment are for convenience and reference only and do not in any way modify,
interpret, or construe the intent of the parties or affect any of the
provisions of this Assignment.
5.7 Hold Harmless and Indemnity. Each of the parties agrees to
hold the other party harmless and indemnify the other party from and against
any and all loss, cost, damage or liability which the other party may incur or
sustain as a result of any action by such party or for any breach by such party
of any warranty or representation contained in this Assignment, or for any
misrepresentation or material omission in the representations herein, or for
any violation of any applicable law, ordinance or regulation, whether by
neglect or willful act
7
<PAGE> 8
and whether by a party or its agents, contractors, or employees. Such
indemnification shall include, among other costs, administrative costs, civil
penalties, attorneys' fees and costs of appeal, settlement or defense, and the
obligation to undertake or assume the defense of any claim.
5.8 Law Applicable. This Assignment and its interpretation,
construction, and enforcement, shall be governed by the laws of the State of
Oregon.
5.9 Legal Effects and Return. No representation, warranty or
recommendation is made by any party or its respective agent or attorney
regarding the legal sufficiency or effect, financial return, or tax
consequences of any transaction contemplated under this Assignment to any
individual or specific entity, and each party acknowledges it has been advised
to submit this Assignment to independent legal counsel before signing it. There
shall be no presumption in favor of or against any party with regard to which
party arranged for initial drafting of this Assignment.
5.10 Notices. Any notice required or desired to be given hereunder
shall be deemed given if personally delivered, properly sent by facsimile
transmission, or ninety-six (96) hours after mailing (first class postage
prepaid, return receipt requested), to the parties at the following addresses,
or at such other addresses as may be given by proper notice:
5.10(a) TRENDWEST: TRENDWEST RESORTS, INC., 12301 N.E. 10th
Pl., Bellevue, Washington 98005; facsimile transmittal (206) 990-2302.
5.10(b) DEVELOPER: Running Y, Inc., 821 S. 6th St., Redmond, OR
97756; facsimile transmittal (503) 923-0881.
5.11 Severability. If any provision of this Assignment is held to be
unenforceable, invalid or illegal by any arbitrator or court of competent
jurisdiction, such shall not affect the remainder of this Assignment.
5.12 Successors. Subject to Section 5.3 regarding assignment, this
Assignment shall be binding upon and benefit the heirs, legal representatives,
successors, and assigns of the parties.
5.13 Survival. All provisions, covenants, and warranties hereunder
shall survive the conveyance of the Developer Property to the Club.
5.14 Termination. This Agreement shall be terminable by either party
within thirty (30) days of written notice given to the other party by certified
mail, return receipt requested, directed to the address set forth in paragraph
5.10 above, as amended.
8
<PAGE> 9
5.15 Waiver. No waiver of enforcement or breach of any of the
provisions of this Assignment shall be deemed, or shall constitute, a waiver of
any other provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver. No waiver shall be binding unless in writing and signed by
the person making the waiver.
5.16 Word usage. Unless the context clearly otherwise requires, (a)
the plural and singular numbers or the masculine, feminine and neuter genders
shall each be deemed to include the others; (b) "shall", "will", or "agrees"
are mandatory, and "may" is permissive; (c) "or" is not exclusive; and (d)
"including" is not limiting.
5.17 Exhibit. The following Exhibits are attached hereto and
incorporated herein by this reference:
Exhibit One - DEVELOPER PROPERTY DESCRIPTION
Exhibit Two - ADDENDUM TO NONEXCLUSIVE LIMITED ASSIGNMENT
6: SIGNATURES. The individuals applying their signatures to this
Assignment warrant that they are signing for themselves individually, or if
signing in a representative capacity for a person or entity whose name is set
forth immediately above their signature, and that they have been expressly
authorized to sign the Assignment on behalf of such person or entity.
Signed effective the date first above written.
TRENDWEST: DEVELOPER:
TRENDWEST RESORTS, INC., RUNNING Y, INC.,
an Oregon Corporation an Oregon Corporation
By /s/ WILLIAM F. PEARE By /s/ JERRY ANDRES
---------------------------- ------------------------------
William F. Peare, President Jerry Andres, President
9
<PAGE> 10
EXHIBIT ONE
- --------------------------------------------------------------------------------
DEVELOPER PROPERTY DESCRIPTION
That Certain real Property located in the City of (in unincorporated Klamath
county), County of Klamath, described as follows: Lot 87, RUNNING Y RESORT,
PHASE 1, according to the official plat recorded August 2, 1996, on file in the
office of the Klamath County Clerk, and all improvements located thereon;
located in the County of Klamath, State of Oregon.
<PAGE> 11
EXHIBIT TWO
ADDENDUM TO
NONEXCLUSIVE LIMITED ASSIGNMENT
This Addendum is to the Nonexclusive Limited Assignment between
Trendwest Resorts and RUNNING Y, INC., dated September 20, 1996.
This Addendum is made pursuant to the Annexation section of that
Assignment (Sec. 2.1). It is agreed between Trendwest Resorts and Eagle Crest
properties that the following described property shall be annexed into
WorldMark, The Club under the terms of the above referenced assignment.
That certain real property located in the County of Deshutes, Oregon,
described as follows: Condominiums ___________, inclusive, as set forth
on that certain plan entitled "Condominium Plan of ___________________
Condominiums" ("Plan") consisting of ___________ (___) sheets recorded
on ___________, 19__, in Book _____ of Maps at pages _____,
______________ County Records, _____, which constitute a condominium
plan for the _________________ Condominium Project ("Project"), which is
located on the land described as Parcel _____ as shown on the "Final Map
of ______________ ("Map") consisting of ________ (___) sheets recorded
on ___________, 19__, in Book _____ of Maps at Pages _____,
_____________________ County Records, _______________.
The persons applying their signatures to this Addendum are signing in a
representative capacity for the entity whose name is set forth immediately
above their signature, and that they have been expressly authorized to sign
the Addendum on behalf of such entity.
TRENDWEST RESORTS: RUNNING Y, INC.:
TRENDWEST RESORTS, INC., RUNNING Y, INC.,
an Oregon Corporation an Oregon Corporation
By By
---------------------------- ------------------------------
William F. Peare, President Jerry Andres, President
<PAGE> 1
Exhibit 10.17
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is
made this 30th day of December, 1992, by and between TRENDWEST RESORTS, INC. and
EAGLE CREST PARTNERSHIP LTD. (hereinafter collectively referred to as "Sellers")
and Richard L. Wendt and Roderick C. Wendt (hereinafter collectively referred to
as "Buyers"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the following terms
shall have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts
receivable or collateral notes of Sellers which are described and listed in
Exhibit A hereto, free and clear of all liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be
executed by the Sellers and Buyers at the Closing in the form of attached
Exhibit B covering transfer of the Sellers' interest in the Acquired Purchase
contracts.
c. "Bill of Sale" means the instrument to be executed by the Sellers
and delivered to the Buyers at the Closing in the form of attached Exhibit C.
d. "Buyers" means Richard L. Wendt and Roderick C. Wendt both
individual residents of the state of Oregon with their mailing address located
at 3250 Lakeport Blvd., Klamath Falls, Oregon 97601.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective Time" has the meaning specified in Section 3 hereof.
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
j. "Sellers" means TRENDWEST RESORTS, INC. and located at 4010 Lake
Washington Blvd., Suite 210, Kirkland, Washington 98033 and EAGLE CREST
PARTNERSHIP, LTD. with the general partners located at 803 Main St., Klamath
Falls, Oregon 97601.
-1-
<PAGE> 2
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED PURCHASE CONTRACTS. Subject
to the terms and conditions and in reliance upon the representations and
warranties contained in this Agreement, Sellers shall sell to the Buyers and
Buyers shall acquire from Sellers the Acquired Purchase Contracts.
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Sellers' offices, located at 4010 Lake Washington Blvd., Suite 210, Kirkland,
Washington 98033 at 10:00 a.m. (local time) on December 30, 1992 (or such other
place, date and time as shall be agreed upon by Buyers and Sellers). The date of
the Closing is referred to in this Agreement an the "Closing Date". When
completed, the Closing shall be effective as of 12:01 a.m. (local time) on
December 30, 1992 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts,
Buyers shall pay to Sellers the total sum of Fourteen Million Thirteen Thousand
Five Hundred Seventeen and 65/100ths Dollars ($14,013,517.65) (hereinafter
referred to as "Purchase Price"), payable, at Closing, in immediately available
funds of the United States by wire transfer.
5. REPRESENTATIONS AND WARRANTIES OF SELLERS. Sellers hereby warrant and
represent to Buyers as follows:
5.1 Standing and Authority of Sellers. Trendwest Resorts, Inc. is a
corporation, duly organized and validly existing in good standing under the laws
of the State of Washington and possesses all requisite corporate power and
authority to enter into and perform this Agreement. Eagle Crest Partnership,
Ltd. is a limited partnership, duly organized and validly existing in good
standing under the laws of the state of Oregon and possesses all requisite power
and authority to enter into and perform this Agreement. This Agreement is a
valid and binding obligation of Sellers, duly enforceable in accordance with its
terms.
5.2 Title and Condition of Acquired Assets. Sellers have good,
marketable and indefeasible title to all of the Acquired Purchase Contracts at
the Closing and as of the Effective Time, free and clear of all mortgages,
liens, charges, claims, leases, restrictions and encumbrances whatsoever. There
is no agreement of any kind whereby any Person or Persons have any right to
acquire or obtain (by purchase, gift, merger, consolidation or otherwise) an
interest in any of the Acquired Purchase Contracts.
5.3 Compliance with Instruments. Sellers are not in default under, or
in breach of any material term or provision of contract, lease, agreement or
other instrument to which the Acquired Purchase Contracts are bound. The
execution, delivery and performance of this Agreement by Sellers does not and
will
-2-
<PAGE> 3
not conflict with or result in a breach of or a default under, or give rise to
any right of termination, cancellation or acceleration with respect to, any of
the terms, conditions or provisions of any (as so defined) indenture, contract,
agreement, license, lease or other instrument to which the Acquired Purchase
Contracts are bound.
5.4 Authorization by Sellers. The execution, delivery and performance
of this Agreement by Sellers have been duly and validly authorized by all
necessary action on the part of Sellers and this Agreement is a valid, binding
and enforceable obligation of Sellers except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting or limiting the rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Sellers or under the
authority of Sellers are or will be entitled to any broker's, finder's or
similar fee, directly or indirectly from the Buyers in connection with the asset
purchase contemplated in this Agreement.
5.6 Disclosure. To Sellers' knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLERS' OBLIGATION TO CLOSE. The obligation of the
Sellers to transfer, assign, and deliver the Acquired Purchase Contracts to the
Buyers pursuant to this Agreement is subject to the satisfaction (unless waived
in writing by Sellers) of each of the following conditions at and as of the
Closing.
6.1 Performance of Obligations by Buyers. The Buyers shall have
performed and complied with all agreements and conditions required to be
performed or complied with by Buyers under this Agreement prior to or at the
Closing.
6.2 Purchase Price. Sellers shall have received, the Purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. The Buyers shall have obtained or effected
all consents, approvals, waivers, notices and filings required in connection
with the execution and delivery by Buyers of this Agreement or consummation by
Buyers of the transactions contemplated thereby, and any notice or waiting
period relating thereto shall have expired with all requirements lawfully
imposed having been satisfied in all material respects.
6.4 Escrow Service Agreement. The Buyers, Sellers, and the escrow agent
shall sign and deliver the Service Escrow Agreement in the form attached hereto
as Exhibit D and E.
-3-
<PAGE> 4
7. CONDITIONS TO THE BUYERS' OBLIGATION TO CLOSE. The obligation of the
Buyers to purchase the Acquired Purchase Contracts from Sellers pursuant hereto
is subject to the satisfaction (unless waived in writing by the Buyers) of each
of the following conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Sellers contained in Section 5 hereof shall be true and correct in
all material respects on and as of the date of this Agreement and at and as of
the Closing as though made at and as of the Closing, except as affected by the
transactions contemplated by this Agreement.
7.2 Performance of Obligations by Sellers. Sellers shall have performed
and complied with all agreements and conditions required to be performed or
complied with by Sellers under this Agreement prior to or at the Closing
including without limitation the delivery to Buyers of: (a) a duly executed Bill
of Sale transferring to Buyers all of the Acquired Purchase Contracts free of
all liens and encumbrances; (b) a duly executed Assignment and Assumption
Agreement transferring the Acquired Purchase Contracts; (c) a certified copy of
resolutions of the Board of Directors of Sellers authorizing it to enter into
and perform this Agreement.
7.3 Consents and Notices. Sellers shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Sellers of this Agreement or consummation by
Seller of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7.4 Escrow Agreement. The Buyers, Sellers, and the escrow agent shall
sign and deliver the Service Escrow Agreement in the form attached hereto as
Exhibit D and E.
8. FURTHER COOPERATION. After the Closing, each party, at the request of
the other and without additional consideration, shall execute and deliver or
cause to be executed and delivered from time to time such further instruments
and shall take such further action as the requesting party may reasonably
require in order to carry out more effectively the intent and purpose of this
Agreement.
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be
waived without affecting any of the rights, conditions, or limitations relating
to the other terms and conditions of this Agreement at any time by an instrument
in writing signed by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time by an instrument in
writing signed by all parties hereto.
-4-
<PAGE> 5
10. EXPENSES. Each party will be responsible for its own attorneys',
accounting and other professional fees incurred in connection with the purchase
contemplated in this Agreement.
11. PRORATIONS. The parties will prorate as of the Effective Time, all
interest and principle receivable and periodic charges which relate to the
Acquired Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and
inure to the benefit of and be enforceable by each of the parties hereto and
their respective successors and assigns. Neither this Agreement nor any
obligation hereunder shall be assigned or assignable by the Buyers or Sellers
without the prior written consent of the other parties hereto.
13. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served if in writing or delivered personally or
sent by certified or registered mail, postage prepaid, addressed as follows:
To Sellers: TRENDWEST RESORTS, INC.
4010 Lake Washington, Blvd., Suite 210
Kirkland, Washington 98033
EAGLE CREST PARTNERSHIP, LTD.
803 Main St.
Klamath Falls, Oregon 97601
Attn: Harold Derrah
To Buyers: Attn: Roderick C. Wendt
3250 Lakeport Blvd.
Klamath Falls, Oregon 97601
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
-5-
<PAGE> 6
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYERS: SELLERS:
TRENDWEST RESORTS, INC.
____________________________ By:________________________________
Richard L. Wendt Its:_______________________________
____________________________ EAGLE CREST PARTNERSHIP, LTD.
Roderick C. Wendt
By:________________________________
Its:_______________________________
-6-
<PAGE> 1
Exhibit 10.18
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is
made this 1st day of April, 1993, by and between TRENDWEST RESORTS, INC.
(hereinafter referred to as "Seller") and Richard L. Wendt and Roderick C. Wendt
(hereinafter collectively referred to as "Buyers"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the following terms
shall have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts
receivable or collateral notes of Seller which are described and listed in
Exhibit A hereto, free and clear of all liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be
executed by the Seller and Buyers at the Closing in the form of attached Exhibit
B covering transfer of the Seller's interest in the Acquired Purchase contracts.
c. "Bill of Sale" means the instrument to be executed by the Seller and
delivered to the Buyers at the Closing in the form of attached Exhibit C.
d. "Buyers" means Richard L. Wendt and Roderick C. Wendt both
individual residents of the state of Oregon with their mailing address located
at 3250 Lakeport Blvd., Klamath Falls, Oregon 97601.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective Time" has the meaning specified in Section 3 hereof.
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
1
<PAGE> 2
j. "Seller" means TRENDWEST RESORTS, INC. located at 4010 Lake
Washington Blvd., Suite 210, Kirkland, Washington 98033.
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED PURCHASE CONTRACTS. Subject
to the terms and conditions and in reliance upon the representations and
warranties contained in this Agreement, Seller shall sell to the Buyers and
Buyers shall acquire from Seller the Acquired Purchase Contracts.
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Seller's offices, located at 4010 Lake Washington Blvd., Suite 210, Kirkland,
Washington 98033 at 10:00 a.m. (local time) on April 1, 1993 (or such other
place, date and time as shall be agreed upon by Buyers and Seller). The date of
the Closing is referred to in this Agreement as the "Closing Date". When
completed, the Closing shall be effective as of 12:01 a.m. (local time) on April
1, 1993 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts,
Buyers shall pay to Seller the total sum of Nine Hundred Eighty Six Thousand
Four Hundred Eighty Two and 35/100ths Dollars ($986,482.35) (hereinafter
referred to as "Purchase Price"), payable, at Closing, in immediately available
funds of the United States by wire transfer.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Buyers as follows:
5.1 Standing and Authority of Sellers. Trendwest Resorts, Inc. is a
corporation, duly organized and validly existing in good standing under the laws
of the State of Washington and possesses all requisite corporate power and
authority to enter into and perform this Agreement. This Agreement is a valid
and binding obligation of Seller, duly enforceable in accordance with its terms.
5.2 Title and Condition of Acquired Assets. Seller has good, marketable
and indefeasible title to all of the Acquired Purchase Contracts at the Closing
and as of the Effective Time, free and clear of all mortgages, liens, charges,
claims, leases, restrictions and encumbrances whatsoever. There is no agreement
of any kind whereby any Person or Persons have any right to acquire or obtain
(by purchase, gift, merger, consolidation or otherwise) an interest in any of
the Acquired Purchase Contracts.
2
<PAGE> 3
5.3 Compliance with Instruments. Seller is not in default under, or in
breach of any material term or provision of contract, lease, agreement or other
instrument to which the Acquired Purchase Contracts are bound. The execution,
delivery and performance of this Agreement by Seller does not and will not
conflict with or result in a breach of or a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, any of the
terms, conditions or provisions of any (as so defined) indenture, contract,
agreement, license, lease or other instrument to which the Acquired Purchase
Contracts are bound.
5.4 Authorization by Seller. The execution, delivery and performance of
this Agreement by Seller has been duly and validly authorized by all necessary
action on the part of Seller and this Agreement is a valid, binding and
enforceable obligation of Seller except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting or limiting the rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Seller or under the
authority of Seller is or will be entitled to any broker's, finder's or similar
fee, directly or indirectly from the Buyers in connection with the asset
purchase contemplated in this Agreement.
5.6 Disclosure. To Seller's knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of the
Seller to transfer, assign, and deliver the Acquired Purchase Contracts to the
Buyers pursuant to this Agreement is subject to the satisfaction (unless waived
in writing by Seller) of each of the following conditions at and as of the
Closing.
6.1 Performance of Obligations by Buyers. The Buyers shall have
performed and complied with all agreements and conditions required to be
performed or complied with by Buyers under this Agreement prior to or at the
Closing.
6.2 Purchase Price. Seller shall have received, the Purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. The Buyers shall have obtained or effected
all consents, approvals, waivers, notices and filings required in connection
with the execution and delivery by Buyers of this Agreement or consummation by
Buyers of the transactions
3
<PAGE> 4
contemplated thereby, and any notice or waiting period relating thereto shall
have expired with all requirements lawfully imposed having been satisfied in all
material respects.
6.4 Escrow Service Agreement. The Buyers, Seller, and the escrow agent
shall sign and deliver the Service Escrow Agreement in the form attached hereto
as Exhibit D and E.
7. CONDITIONS TO THE BUYERS' OBLIGATION TO CLOSE. The obligation of the
Buyers to purchase the Acquired Purchase Contracts from Seller pursuant hereto
is subject to the satisfaction (unless waived in writing by the Buyers) of each
of the following conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Seller contained in Section 5 hereof shall be true and correct in
all material respects on and as of the date of this Agreement and at and as of
the Closing as though made at and as of the Closing, except as affected by the
transactions contemplated by this Agreement.
7.2 Performance of Obligations by Seller. Seller shall have performed
and complied with all agreements and conditions required to be performed or
complied with by Seller under this Agreement prior to or at the Closing
including without limitation the delivery to Buyers of: (a) a duly executed Bill
of Sale transferring to Buyers all of the Acquired Purchase Contracts free of
all liens and encumbrances; (b) a duly executed Assignment and Assumption
Agreement transferring the Acquired Purchase Contracts; (c) a certified copy of
resolutions of the Board of Directors of Seller authorizing it to enter into and
perform this Agreement.
7.3 Consents and Notices. Seller shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Seller of this Agreement or consummation by Seller
of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7.4 Escrow Agreement. The Buyers, Seller, and the escrow agent shall
sign and deliver the Service Escrow Agreement in the form attached hereto as
Exhibit D and E.
8. FURTHER COOPERATION. After the Closing, each party, at the request of
the other and without additional consideration, shall execute and deliver or
cause to be executed and delivered from time to time such further instruments
and shall take such further action as the requesting party may reasonably
require in order to
4
<PAGE> 5
carry out more effectively the intent and purpose of this Agreement.
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be
waived without affecting any of the rights, conditions, or limitations relating
to the other terms and conditions of this Agreement at any time by an instrument
in writing signed by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time by an instrument in
writing signed by all parties hereto.
10. EXPENSES. Each party will be responsible for its own attorneys',
accounting and other professional fees incurred in connection with the purchase
contemplated in this Agreement.
11. PRORATIONS. The parties will prorate as of the Effective Time, all
interest and principle receivable and periodic charges which relate to the
Acquired Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and
inure to the benefit of and be enforceable by each of the parties hereto and
their respective successors and assigns. Neither this Agreement nor any
obligation hereunder shall be assigned or assignable by the Buyers or Seller
without the prior written consent of the other parties hereto.
13. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served if in writing or delivered personally or
sent by certified or registered mail, postage prepaid, addressed as follows:
To Seller: TRENDWEST RESORTS, INC.
4010 Lake Washington, Blvd., Suite 210
Kirkland, Washington 98033
To Buyers: Attn: Roderick C. Wendt
3250 Lakeport Blvd.
Klamath Falls, Oregon 97601
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
5
<PAGE> 6
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYERS: SELLER:
TRENDWEST RESORTS, INC.
______________________________ By:___________________________
Richard L. Wendt Its:__________________________
______________________________
Roderick C. Wendt
6
<PAGE> 7
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, (i) TRENDWEST RESORTS, INC., a Washington
corporation and (referred to herein as "Assignor"), assign, transfer and set
over to Richard L. Wendt and Roderick C. Wendt (collectively referred to as
"Assignees"), all of Assignor's right, title and interest as of the Effective
Time in the Acquired Purchase Contracts described in that certain Purchase
Agreement dated as of April 1, 1993 between Assignor and Assignees
("Agreement"), and listed in the attached Schedule; and (ii) the Assignees
hereby assume and agree to perform all obligations of Assignor under said
contracts, which arise or mature after the Effective Time.
This Assignment and Assumption Agreement is executed pursuant to the
Agreement, which contains warranties, rights and limitations with respect to the
obligations assigned and assumed hereunder and which Agreement is incorporated
herein by this reference. All capitalized terms in this instrument shall have
the meanings set forth in the Agreement, unless separately defined herein.
DATED this 1st day of April, 1993.
ASSIGNEES: ASSIGNOR:
TRENDWEST RESORTS, INC.
______________________________ By:___________________________
Richard L. Wendt Its:__________________________
______________________________
Roderick C. Wendt
7
<PAGE> 8
BILL OF SALE
FOR VALUE RECEIVED, TRENDWEST RESORTS, INC., a Washington corporation
(referred to herein as "Seller") sell, assign and transfer to Richard L. Wendt
and Roderick C. Wendt (collectively referred to as "Buyers"), all of Seller's
right, title and interest in the Acquired Purchase Contracts as of the Effective
Time. The property being conveyed pursuant to this Bill of Sale is listed on
Appendix "A", attached hereto.
This Bill of Sale is given pursuant to that certain Purchase Agreement
dated as of April 1, 1993, between Seller and Buyers ("Agreement"), which is
incorporated herein by reference and which contains certain warranties and
disclaimers applicable for this instrument. All capitalized terms in this Bill
of Sale shall have the meanings specified in the Agreement.
DATED this 1st day of April, 1993.
TRENDWEST RESORTS, INC.
By:_______________________
Its:______________________
8
<PAGE> 1
EXHIBIT 10.20
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is made this
15th day of March, 1993, by and between TRENDWEST RESORTS, INC. (hereinafter
referred to as "Seller") and JELD-WEN, inc. (hereinafter referred to as
"Buyer"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the following terms shall
have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts receivable of
Seller which are described and listed in Exhibit A hereto, free and clear of all
liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be executed
by the Seller and Buyer at the Closing in the form of attached Exhibit B
covering transfer of the Seller's interest in the Acquired Purchase contracts.
c. "Bill of Sale" means the instrument to be executed by the Seller and
delivered to the Buyer at the Closing in the form of attached Exhibit C.
d. "Buyer" means the JELD-WEN, inc., an Oregon corporation, located at 3250
Lakeport Blvd., Klamath Falls, Oregon 97601.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective-Time" has the meaning specified in Section 3 hereof.
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
j. "Seller" means TRENDWEST RESORTS, INC. located at 4010 Lake Washington
Blvd., Suite 210, Kirkland, Washington 98033.
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED CONTRACTS. Subject to the terms
and conditions and in reliance upon the
1
<PAGE> 2
representations and warranties contained in this Agreement, Seller shall sell to
Buyer and Buyer shall acquire from Seller the Acquired Purchase Contracts.
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Seller's offices, located at 4010 Lake Washington Blvd., Suite 210, Kirkland,
Washington 98033 at 10:00 a.m. (local time) on March 15, 1993 (or such other
place, date and time as shall be agreed upon by Buyer and Seller). The date of
the closing is referred to in this Agreement as the "Closing Date". When
completed, the Closing shall be effective as of 12:01 a.m. (local time) on March
15, 1993 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts, Buyer
shall pay to Seller the total sum of One Million Seven Hundred Fifty Thousand
and No/100ths Dollars ($1,750,000.00) (hereinafter referred to as "Purchase
Price"), payable, at Closing, in immediately available funds of the United
States by wire transfer.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Buyer as follows:
5.1 Standing and Authority of Seller. Seller is a corporation duly organized
and validly existing in good standing under the laws of the State of Washington
and possesses all requisite corporate power and authority to enter into and
perform this Agreement. This Agreement is a valid and binding obligation of
Seller, duly enforceable in accordance with its terms.
5.2 Title and Condition of Acquired Assets. Seller has good, marketable and
indefeasible title to all of the Acquired Purchase Contracts at the Closing and
as of the Effective Time, free and clear of all mortgages, liens, charges,
claims, leases, restrictions and encumbrances whatsoever. There is no agreement
of any kind whereby any Person or Persons have any right to acquire or obtain
(by purchase, gift, merger, consolidation or otherwise) an interest in any of
the Acquired Purchase Contracts.
5.3 Compliance with Instruments. Seller is not in default under, or in breach
of any material term or provision of contract, lease, agreement or other
instrument to which the Acquired Purchase Contracts are bound. The execution,
delivery and performance of this Agreement by Seller does not and will not
conflict with or result in a breach of or a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, any of the
terms, conditions or provisions of any (as so defined)
2
<PAGE> 3
indenture, contract, agreement, license, lease or other instrument to which the
Acquired Purchase Contracts are bound.
5.4 Authorization by Seller. The execution, delivery and performance of this
Agreement by Seller have been duly and validly authorized by all necessary
action on the part of Seller and this Agreement is a valid, binding and
enforceable obligation of Seller except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting or limiting the rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Seller or under the authority
of Seller is or will be entitled to any broker's, finder's or similar fee,
directly or indirectly from the Buyer in connection with the asset purchase
contemplated in this Agreement.
5.6 Disclosure. To Seller's knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of the Seller to
transfer, assign, and deliver the Acquired Purchase Contracts to Buyer pursuant
to this Agreement is subject to the satisfaction (unless waived in writing by
Seller) of each of the following conditions at and as of the Closing.
6.1 Performance of Obligations by Buyer. Buyer shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Buyer under this Agreement prior to or at the Closing.
6.2 Purchase Price. Seller shall have received, the Purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. Buyer shall have obtained or effected all consents,
approvals, waivers, notices and filings required in connection with the
execution and delivery by Buyer of this Agreement or consummation by Buyer of
the transactions contemplated thereby, and any notice or waiting period relating
thereto shall have expired with all requirements lawfully imposed having been
satisfied in all material respects.
6.4 Escrow Service Agreement. Buyer, Seller, and the escrow agent shall sign
and deliver the Service Escrow Agreement in the form attached hereto as Exhibit
D.
7. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to
purchase the Acquired Purchase Contracts from Seller pursuant hereto is subject
to the satisfaction (unless waived in
3
<PAGE> 4
writing by Buyer) of each of the following conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Seller contained in Section 5 hereof shall be true and correct in
all material respects on and as of the date of this Agreement and at and as of
the Closing as though made at and as of the Closing, except as affected by the
transactions contemplated by this Agreement.
7.2 Performance of Obligations by Seller. Seller shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Seller under this Agreement prior to or at the Closing including without
limitation the delivery to Buyer of: (a) a duly executed Bill of Sale
transferring to Buyer all of the Acquired Purchase Contracts free of all liens
and encumbrances; (b) a duly executed Assignment and Assumption Agreement
transferring the Acquired Purchase Contracts; (c) a certified copy of
resolutions of the Board of Directors of Seller authorizing it to enter into and
perform this Agreement.
7.3 Consents and Notices. Seller shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Seller of this Agreement or consummation by Seller
of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7.4 Escrow Agreement. Buyer, Seller, and the escrow agent shall sign and
deliver the Service Escrow Agreement in the form attached hereto as Exhibit D.
8. FURTHER COOPERATION. After the Closing, each party, at the request of the
other and without additional consideration, shall execute and deliver or cause
to be executed and delivered from time to time such further requesting party may
reasonably require in order to carry out more effectively the intent and purpose
of this Agreement.
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be waived
without affecting any of the rights, conditions, or limitations relating to the
other terms and conditions of this Agreement at any time by an instrument in
writing signed by the party which is entitled to the benefits thereof and this
Agreement may be amended or supplemented at any time by an instrument in writing
signed by all parties hereto.
10. EXPENSES. Each party will be responsible for its own
attorneys', accounting and other professional fees incurred in
connection with the purchase contemplated in this Agreement.
4
<PAGE> 5
11. PRORATIONS. The parties will prorate as of the Effective Time, all interest
and principle receivable and periodic charges which relate to the Acquired
Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and inure
to the benefit of and be enforceable by each of the parties hereto and their
respective successors and assigns. Neither this Agreement nor any obligation
hereunder shall be assigned or assignable by Buyer or Seller without the prior
written consent of the other parties hereto.
13. NOTICES. All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal process in regard hereto shall
be validly given, made or served if in writing or delivered personally or sent
by certified or registered mail, postage prepaid, addressed as follows:
To Seller: TRENDWEST RESORTS, INC.
4010 Lake Washington, Blvd, Suite 210
Kirkland, Washington 98033
To Buyer: JELD-WEN, inc.
3250 Lakeport Blvd.
Klamath Falls, Oregon 97601
Attn: Douglas P. Kintzinger
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto with respect to the transactions contemplated hereby and
supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
17. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
5
<PAGE> 6
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
BUYER: SELLER:
JELD-WEN, inc. TRENDWEST RESORTS, INC.
By: __________________________ By: __________________________
Douglas P. Kintzinger Its: __________________________
Secretary
6
<PAGE> 7
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, (i) TRENDWEST RESORTS, INC., a Washington
corporation ("Assignor"), assigns, transfers and sets over to JELD-WEN, inc.
("Assignee"), all of Assignor's right, title and interest as of the Effective
Time in the Acquired Purchase Contracts described in that certain Purchase
Agreement dated as of March 15, 1993 between Assignor and Assignee
("Agreement"), and listed in the attached Schedule; and (ii) Assignee hereby
assumes and agrees to perform all obligations of Assignor under said contracts,
which arise or mature after the Effective Time.
This Assignment and Assumption Agreement is executed pursuant to the
Agreement, which contains warranties, rights and limitations with respect to the
obligations assigned and assumed hereunder and which Agreement is incorporated
herein by this reference. All capitalized terms in this instrument shall have
the meanings set forth in the Agreement, unless separately defined herein.
DATED this 15th day of March, 1993.
JELD-WEN, inc. TRENDWEST RESORTS, INC.
By: __________________________ By: __________________________
Douglas P. Kintzinger Its: __________________________
Secretary
7
<PAGE> 8
BILL OF SALE
FOR VALUE RECEIVED, TRENDWEST RESORTS, INC., a Washington corporation
("Seller") sells, assigns and transfers to JELD-WEN, inc. ("Buyer"), all of
Seller's right, title and interest in the Acquired Purchase Contracts as of the
Effective Time. The property being conveyed pursuant to this Bill of Sale is
listed on Appendix "A", attached hereto.
This Bill of Sale is given pursuant to that certain Purchase Agreement
dated as of March 15, 1993, between Seller and Buyer ("Agreement"), which is
incorporated herein by reference and which contains certain warranties and
disclaimers applicable for this instrument. All capitalized terms in this Bill
of Sale shall have the meanings specified in the Agreement.
DATED this 15th day of March, 1993.
TRENDWEST RESORTS, INC.
By: __________________________
Its: __________________________
8
<PAGE> 9
Assignment Agreement
As part of its annual contribution to the JELD-WEN FOUNDATION, JELD-WEN, inc.,
an Oregon corporation ("Assignor"), assigns, transfers, and sets over to the
JELD-WEN FOUNDATION ("Assignee"), all of Assignor's right, title and interest as
of March 15, 1993, in the Acquired Purchase Contracts, as well as any
warranties, rights and limitations with respect to such obligations, described
in that certain Purchase Agreement dated March 15, 1993, between Assignor and
Trendwest Resorts, Inc., a Washington corporation, and listed in the attached
schedule. All capitalized terms in this instrument shall have the meanings set
forth in the Purchase Agreement described hereinabove, unless separately defined
herein.
Dated this 15th day of March, 1993.
ASSIGNOR:
JELD-WEN, inc.
- ----------------------------
By: Douglas P. Kintzinger
Secretary
9
<PAGE> 1
Exhibit 10.21
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is
made this 30th day of September, 1993, by and between TRENDWEST RESORTS, INC.
(hereinafter referred to as "Seller") and JELD-WEN, inc. (hereinafter referred
to as "Buyer"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the following terms
shall have the respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts
receivable of Seller which are described and listed in Exhibit A hereto, free
and clear of all liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be
executed by the Seller and Buyer at the Closing in the form of attached Exhibit
B covering transfer of the Seller's interest in the Acquired Purchase contracts.
c. "Bill of Sale" means the instrument to be executed by the Seller and
delivered to the Buyer at the Closing in the form of attached Exhibit C.
d. "Buyer" means the JELD-WEN, inc., an Oregon corporation, located at
3250 Lakeport Blvd., Klamath Falls, Oregon 97601.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective Time" has the meaning specified in Section 3 hereof.
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
j. "Seller" means TRENDWEST RESORTS, INC. located at 4010 Lake
Washington Blvd., Suite 210, Kirkland, Washington 98033.
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED PURCHASE CONTRACTS. Subject
to the terms and conditions and in reliance upon the representations and
warranties contained in this Agreement, Seller shall sell to Buyer and Buyer
shall acquire from Seller the Acquired Purchase Contracts.
-1-
<PAGE> 2
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Seller's offices, located at 4010 Lake Washington Blvd., Suite 210, Kirkland,
Washington 98033 at 10:00 a.m. (local time) on September 30, 1993 (or such other
place, date and time as shall be agreed upon by Buyer and Seller). The date of
the Closing is referred to in this Agreement as the "Closing Date". When
completed, the Closing shall be effective as of 12:01 a.m. (local time) on
September 30, 1993 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts,
Buyer shall pay to Seller the total sum of Two Million One Hundred Thousand and
No/100ths Dollars ($2,100,000.00) (hereinafter referred to as "Purchase Price"),
payable, at Closing, in immediately available funds of the United States by wire
transfer.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Buyer as follows:
5.1 Standing and Authority of Seller. Seller is a corporation duly
organized and validly existing in good standing under the laws of the State of
Washington and possesses all requisite corporate power and authority to enter
into and perform this Agreement. This Agreement is a valid and binding
obligation of Seller, duly enforceable in accordance with its terms.
5.2 Title and Condition of Acquired Assets. Seller has good, marketable
and indefeasible title to all of the Acquired Purchase Contracts at the Closing
and as of the Effective Time, free and clear of all mortgages, liens, charges,
claims, leases, restrictions and encumbrances whatsoever. There is no agreement
of any kind whereby any Person or Persons have any right to acquire or obtain
(by purchase, gift, merger, consolidation or otherwise) an interest in any of
the Acquired Purchase Contracts.
5.3 Compliance with Instruments. Seller is not in default under, or in
breach of any material term or provision of contract, lease, agreement or other
instrument to which the Acquired Purchase Contracts are bound. The execution,
delivery and performance of this Agreement by Seller does not and will not
conflict with or result in a breach of or a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, any of the
terms, conditions or provisions of any (as so defined) indenture, contract,
agreement, license, lease or other instrument to which the Acquired Purchase
Contracts are bound.
5.4 Authorization by Seller. The execution, delivery and performance of
this Agreement by Seller have been duly and validly authorized by all necessary
action on the part of Seller and this Agreement is a valid, binding and
enforceable obligation of Seller
-2-
<PAGE> 3
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws affecting or limiting the
rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Seller or under the
authority of Seller is or will be entitled to any broker's, finder's or similar
fee, directly or indirectly from the Buyer in connection with the asset purchase
contemplated in this Agreement.
5.6 Disclosure. To Seller's knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of the
Seller to transfer, assign, and deliver the Acquired Purchase Contracts to Buyer
pursuant to this Agreement is subject to the satisfaction (unless waived in
writing by Seller) of each of the following conditions at and as of the Closing.
6.1 Performance of Obligations by Buyer. Buyer shall have performed and
complied with all agreements and conditions required to be performed or complied
with by Buyer under this Agreement prior to or at the Closing.
6.2 Purchase Price. Seller shall have received, the purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. Buyer shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Buyer of this Agreement or consummation by Buyer
of the transactions contemplated thereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
6.4 Escrow Service Agreement. Buyer, Seller, and the escrow agent shall
sign and deliver the Service Escrow Agreement in the form attached hereto as
Exhibit D.
7. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to
purchase the Acquired Purchase Contracts from Seller pursuant hereto is subject
to the satisfaction (unless waived in writing by Buyer) of each of the following
conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Seller contained in Section 5 hereof shall be true and correct in
all material respects on and as of the date of this Agreement and at and as of
the Closing as though made at and as of the Closing, except as affected by the
transactions contemplated by this Agreement.
-3-
<PAGE> 4
7.2 Performance of Obligations by Seller. Seller shall have performed
and complied with all agreements and conditions required to be performed or
complied with by Seller under this Agreement prior to or at the Closing
including without limitation the delivery to Buyer of: (a) a duly executed Bill
of Sale transferring to Buyer all of the Acquired Purchase Contracts free of all
liens and encumbrances; (b) a duly executed Assignment and Assumption Agreement
transferring the Acquired Purchase Contracts; (c) a certified copy of
resolutions of the Board of Directors of Seller authorizing it to enter into and
perform this Agreement.
7.3 Consents and Notices. Seller shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Seller of this Agreement or consummation by Seller
of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7.4 Escrow Agreement. Buyer (or its assignee), Seller, and the escrow
agent shall sign and deliver the Service Escrow Agreement in the form attached
hereto as Exhibit D.
8. FURTHER COOPERATION. After the Closing, each party, at the request of
the other and without additional consideration, shall execute and deliver or
cause to be executed and delivered from time to time such further instruments
and shall take such further action as the requesting party may reasonably
require in order to carry out more effectively the intent and purpose of this
Agreement.
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be
waived without affecting any of the rights, conditions, or limitations relating
to the other terms and conditions of this Agreement at any time by an instrument
in writing signed by the party which is entitled to the benefits thereof and
this Agreement may be amended or supplemented at any time by an instrument in
writing signed by all parties hereto.
10. EXPENSES. Each party will be responsible for its own attorneys',
accounting and other professional fees incurred in connection with the purchase
contemplated in this Agreement.
11. PRORATIONS. The parties will prorate as of the Effective Time, all
interest and principle receivable and periodic charges which relate to the
Acquired Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and
inure to the benefit of and be enforceable by each of the parties hereto and
their respective successors and assigns. Neither this Agreement nor any
obligation hereunder shall be assigned or assignable by Buyer or Seller without
the prior written consent of the other parties hereto.
-4-
<PAGE> 5
13. NOTICES. All notices, consents, requests, instructions, approvals and
other communications provided for herein and all legal process in regard hereto
shall be validly given, made or served if in writing or delivered personally or
sent by certified or registered mail, postage prepaid, addressed as follows:
To Seller: TRENDWEST RESORTS, INC.
4010 Lake Washington Blvd., Suite 210
Kirkland, Washington 98033
To Buyer: JELD-WEN, inc.
3250 Lakeport Blvd.
Klamath Falls, Oregon 97601
Attn: Douglas P. Kintzinger
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the transactions contemplated hereby
and supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
17. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
BUYER: SELLER:
JELD-WEN, inc. TRENDWEST RESORTS, INC.
By:______________________ By:_____________________________
Douglas P. Kintzinger Its:____________________________
Secretary
-6-
<PAGE> 7
BILL OF SALE
FOR VALUE RECEIVED, TRENDWEST RESORTS, INC., a Washington corporation
("Seller") sells, assigns and transfers to JELD-WEN, inc. ("Buyer"), all of
Seller's right, title and interest in the Acquired Purchase Contracts as of the
Effective Time. The property being conveyed pursuant to this Bill of Sale is
listed on Appendix "A", attached hereto.
This Bill of Sale is given pursuant to that certain Purchase Agreement
dated as of September 30, 1993, between Seller and Buyer ("Agreement"), which is
incorporated herein by reference and which contains certain warranties and
disclaimers applicable for this instrument. All capitalized terms in this Bill
of Sale shall have the meanings specified in the Agreement.
DATED this 30th day of September, 1993.
TRENDWEST RESORTS, INC.
By:________________________
Its:_______________________
-7-
<PAGE> 8
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, (i) TRENDWEST RESORTS, INC., a Washington
corporation ("Assignor"), assigns, transfers and sets over to JELD-WEN, inc.
("Assignee"), all of Assignor's right, title and interest as of the Effective
Time in the Acquired Purchase Contracts described in that certain Purchase
Agreement dated as of September 30, 1993, between Assignor and Assignee
("Agreement"), and listed in the attached Schedule; and (ii) Assignee hereby
assumes and agrees to perform all obligations of Assignor under said contracts,
which arise or mature after the Effective Time.
This Assignment and Assumption Agreement is executed pursuant to the
Agreement, which contains warranties, rights and limitations with respect to the
obligations assigned and assumed hereunder and which Agreement is incorporated
herein by this reference. All capitalized terms in this instrument shall have
the meanings set forth in the Agreement, unless separately defined herein.
DATED this 30th day of September, 1993.
JELD-WEN, inc. TRENDWEST RESORTS, INC.
By:_________________________ By:________________________
Douglas P. Kintzinger Its:_______________________
Secretary
-8-
<PAGE> 9
RECEIPT OF GIFT
The JELD-WEN FOUNDATION, a charitable organization, hereby acknowledges receipt
of a gift from JELD-WEN, inc., consisting of $2,100,000 of TRENDWEST RESORTS,
INC. Contracts Receivable and hereby accepts said gift subject to all of the
terms and conditions provided in that Purchase Agreement and related documents
between JELD-WEN, inc. and TRENDWEST RESORTS, INC. dated September 30, 1993, a
copy of which is attached hereto.
Dated this 30th day of September, 1993.
JELD-WEN FOUNDATION
_________________________
R.C. Wendt
Trustee
-9-
<PAGE> 10
Assignment Agreement
As part of its annual contribution to the JELD-WEN FOUNDATION, JELD-WEN, inc.,
an Oregon corporation ("Assignor"), assigns, transfers, and sets over to the
JELD-WEN FOUNDATION ("Assignee"), all of Assignor's right, title and interest as
of September 30, 1993, in the Acquired Purchase Contracts, as well as any
warranties, rights and limitations with respect to such obligations, described
in that certain Purchase Agreement dated September 30, 1993, between Assignor
and Trendwest Resorts, Inc., a Washington corporation, and listed in the
attached schedule. All capitalized terms in this instrument shall have the
meanings set forth in the Purchase Agreement described hereinabove, unless
separately defined herein.
Dated this 30th day of September, 1993.
ASSIGNOR:
JELD-WEN, inc.
_______________________________
By: Douglas P. Kintzinger
Secretary
-10-
<PAGE> 1
EXHIBIT 10.22
PURCHASE AGREEMENT
This Purchase Agreement (hereinafter referred to as "Agreement") is
made this 12th day of October, 1993, by and between TRENDWEST RESORTS, INC.
(hereinafter referred to as "Seller") and Jewel W. Kintzinger (hereinafter
referred to as "Buyer"), each of whom agrees:
1. DEFINED TERMS. As used in this Purchase Agreement, the
following terms shall have the respective meanings set forth below
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
a. "Acquired Purchase Contracts" means the purchase contracts
receivable or collateral notes of Seller which are described and listed in
Exhibit A hereto, free and clear of all liens and encumbrances.
b. "Assignment and Assumption Agreement" means the agreement to be
executed by the Seller and Buyer at the Closing in the form of attached Exhibit
B (covering transfer of the Seller's interest in the Acquired Purchase
contracts.
c. "Bill of Sale" means the instrument to be executed by the Seller and
delivered to the Buyer at the Closing in the form of attached Exhibit C.
d. "Buyer" means Jewel W. Kintzinger a resident of the state of Florida
with their mailing address located at 16800 Gulf Blvd. #10, North Redington
Beach, FL 33708.
e. "Closing" has the meaning specified in Section 3 hereof.
f. "Closing Date" has the meaning specified in Section 3 hereof.
g. "Effective Time" has the meaning specified in Section 3 hereof.
h. "Person" shall mean an individual, partnership, joint venture,
corporation, bank, trust, unincorporated organization and/or a government or any
department or agency thereof.
i. "Purchase Price" has the meaning specified in Section 4.1 hereof.
j. "Seller" means TRENDWEST RESORTS, INC. located at 4010 Lake
Washington Blvd., Suite 210, Kirkland, Washington 98033.
2. AGREEMENT TO SELL AND PURCHASE THE ACQUIRED PURCHASE
CONTRACTS. Subject to the terms and conditions and in reliance
upon the representations and warranties contained in this
-1-
<PAGE> 2
Agreement, Seller shall sell to the Buyer and Buyer shall acquire from Seller
the Acquired Purchase Contracts.
3. CLOSING; EFFECTIVE TIME. The sale and purchase of the Acquired Purchase
Contracts as contemplated by this Agreement (the "Closing") shall take place at
Seller's offices, located at 4010 Lake Washington Blvd. , Suite 210, Kirkland,
Washington 98033 at 10:00 a.m. (local time) on October 12, 1993 (or such other
place, date and time as shall be agreed upon by Buyer and Seller). The date of
the Closing is referred to in this Agreement as the "Closing Date". When
completed, the Closing shall be effective as of 12:01 a.m. (local time) on
October 12, 1993 (the "Effective Time").
4. PURCHASE PRICE.
4.1 Price. As the purchase price for the Acquired Purchase Contracts,
Buyer shall pay to Seller the total sum of One Million Seven Hundred Thousand
and no/100ths Dollars ($1,700,000.00) (hereinafter referred to as "Purchase
Price"), payable, at Closing, in immediately available funds of the United
States by wire transfer.
5. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants and
represents to Buyer as follows:
5.1 Standing and Authority of Sellers. Trendwest Resorts, Inc. is a
corporation, duly organized and validly existing in good standing under the laws
of the State of Washington and possesses all requisite corporate power and
authority to enter into and perform this Agreement. This Agreement is a valid
and binding obligation of Seller, duly enforceable in accordance with its terms.
5.2 Title and Condition of Acquired Assets. Seller has good, marketable
and indefeasible title to all of the Acquired Purchase Contracts at the Closing
and as of the Effective Time, free and clear of all mortgages, liens, charges,
claims, leases, restrictions and encumbrances whatsoever. There is no agreement
of any kind whereby any Person or Persons have any right to acquire or obtain
(by purchase, gift, merger, consolidation or otherwise) an interest in any of
the Acquired Purchase Contracts.
5.3 Compliance with Instruments. Seller is not in default under, or in
breach of any material term or provision of contract, lease, agreement or other
instrument to which the Acquired Purchase Contracts are bound. The execution,
delivery and performance of this Agreement by Seller does not and will not
conflict with or result in a breach of or a default under, or give rise to any
right of termination, cancellation or acceleration with respect to, any of the
terms, conditions or provisions of any (as so defined) indenture, contract,
agreement, license, lease or other instrument to which the Acquired Purchase
Contracts are bound.
-2-
<PAGE> 3
5.4 Authorization by Seller. The execution, delivery and performance of
this Agreement by Seller has been duly and validly authorized by all necessary
action on the part of Seller and this Agreement is a valid, binding and
enforceable obligation of Seller except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws affecting or limiting the rights of creditors generally.
5.5 Brokers. No person acting on behalf of the Seller or under the
authority of Seller is or will be entitled to any broker's, finder's or similar
fee, directly or indirectly from the Buyer in connection with the asset purchase
contemplated in this Agreement.
5.6 Disclosure. To Seller's knowledge there are no other matters or
liabilities, contingent or otherwise, which materially adversely affects or has
a substantial likelihood in the future of materially adversely affecting the
Acquired Purchase Contracts.
6. CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligation of the Seller to
transfer, assign, and deliver the Acquired Purchase Contracts to the Buyer
pursuant to this Agreement is subject to the satisfaction (unless waived in
writing by Seller) of each of the following conditions at and as of the Closing.
6.1 Performance of Obligations by Buyer. The Buyer shall have performed
and complied with all agreements and conditions required to be performed or
complied with by Buyer under this Agreement prior to or at the Closing.
6.2 Purchase Price. Seller shall have received, the Purchase Price as
described in Section 4.1 herein.
6.3 Consents and Notices. The Buyer shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Buyer of this Agreement or consummation by Buyer
of the transactions contemplated thereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
6.4 Escrow Service Agreement. The Buyer, Seller, and the escrow agent
shall sign and deliver the Service Escrow Agreement in the form attached hereto
as Exhibit D and E.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO CLOSE. The obligation of the Buyer to
purchase the Acquired Purchase Contracts from Seller pursuant hereto is subject
to the satisfaction (unless waived in writing by the Buyer) of each of the
following conditions at and as of the Closing:
7.1 Representations and Warranties Correct. The representations and
warranties of Seller contained in Section 5 hereof shall be true and correct in
all material respects on and as
-3-
<PAGE> 4
of the date of this Agreement and at and as of the Closing as though made at and
as of the Closing, except as affected by the transactions contemplated by this
Agreement.
7.2 Performance of Obligations by Seller. Seller shall have performed
and complied with all agreements and conditions required to be performed or
complied with by Seller under this Agreement prior to or at the Closing
including without limitation the delivery to Buyer of: (a) a duly executed Bill
of Sale transferring to Buyer all of the Acquired Purchase Contracts free of all
liens and encumbrances; (b) a duly executed Assignment and Assumption Agreement
transferring the Acquired Purchase Contracts; (c) a certified copy of
resolutions of the Board of Directors of Seller authorizing it to enter into and
perform this Agreement.
7.3 Consents and Notices. Seller shall have obtained or effected all
consents, approvals, waivers, notices and filings required in connection with
the execution and delivery by Seller of this Agreement or consummation by Seller
of the transactions contemplated hereby, and any notice or waiting period
relating thereto shall have expired with all requirements lawfully imposed
having been satisfied in all material respects.
7.4 Escrow Agreement. The Buyer, Seller, and the escrow agent shall
sign and deliver the Service Escrow Agreement in the form attached hereto as
Exhibit D and E.
8. FURTHER COOPERATION. After the Closing, each party, at the request of the
other and without additional consideration, shall execute and deliver or cause
to be executed and delivered from time to time such further instruments and
shall take such further action as the requesting party may reasonably require in
order to carry out more effectively the intent and purpose of this Agreement.
9. AMENDMENTS AND WAIVERS. Any term or provision of this Agreement may be waived
without affecting any of the rights, conditions, or limitations relating to the
other terms and conditions Of this Agreement at any time by an instrument in
writing signed by the party which is entitled to the benefits thereof and this
Agreement may be amended or supplemented at any time by an instrument in writing
signed by all parties hereto.
10. EXPENSES. Each party will be responsible for its own attorneys', accounting
and other professional fees incurred in connection with the purchase
contemplated in this Agreement.
11. PRORATIONS. The parties will prorate as of the Effective Time, all interest
and principle receivable and periodic charges which relate to the Acquired
Purchase Contracts.
12. ASSIGNMENT AND BINDING EFFECT. The Agreement shall be binding upon and inure
to the benefit of and be enforceable by each of the parties hereto and their
respective successors and assigns. Neither this Agreement nor any obligation
hereunder shall be
-4-
<PAGE> 5
assigned or assignable by the Buyer or Seller without the prior written consent
of the other parties hereto.
13. NOTICES. All notices, consents, requests, instructions, approvals and other
communications provided for herein and all legal processing regard hereto shall
be validly given, made or served if in writing or delivered personally or sent
by certified or registered mail, postage prepaid, addressed as follows:
To Seller: TRENDWEST RESORTS, INC.
4010 Lake Washington Blvd., Suite 210
Kirkland, Washington 98033
To Buyer: Jewel W. Kintzinger
16800 Gulf Blvd. #10
North Redington Beach, FL 33708
or to such other address as any party hereto may, from time to time, designate
in writing delivered in a like manner. Notice given by mail shall be deemed to
be given on the date which is two business days following the date the same is
postmarked.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties hereto with respect to the transactions contemplated hereby and
supersedes and is in full substitution for any and all prior agreements and
understandings between any of said parties relating to such transactions.
15. DESCRIPTIVE HEADINGS. The descriptive headings of the several sections of
this Agreement are inserted for convenience only and shall not control or affect
the meaning or construction of any of the provisions hereof.
16. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OREGON.
17. COUNTERPARTS. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
18. ATTORNEY'S FEES. In the event legal action is taken to enforce this
Agreement or any provision thereof, or as a result of any breach of warranty or
representation or other default of either party, the prevailing party in such
action shall be entitled to receive its reasonable attorney's fees, in addition
to all other costs or charges allowed, which shall be fixed by the court or
courts in which the suit or action, including any appeal thereon, is tried,
heard or decided.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
BUYER: SELLER:
TRENDWEST RESORTS, INC.
By:
- ------------------------- ------------------------
Jewel W. Kintzinger Its:
-----------------------
-6-
<PAGE> 1
Exhibit __
SERVICING ESCROW AGREEMENT
DATED: October 12, 1993
BETWEEN: Jewel W. Kintzinger "Buyer"
AND: TRENDWEST RESORTS, INC. "Seller"
4010 Lake Washington Blvd. #210
Kirkland, WA 98033
AND: SAGE SYSTEMS, INC. "Escrow Agent"
555 116th Ave. NE
Bellevue, WA 98004
Pursuant to the terms of the Purchase Agreement between the Buyer and
Seller dated October 12, 1993 (the "Agreement"), the Buyer has agreed to
purchase $1,700,000.00 of Seller's contracts receivable or collateral notes
("Acquired Purchase Contracts"). Payment of the Acquired Purchase Contracts are
secured by security interests and liens in certain beneficial property interests
in condominiums and resorts, as more fully described in the Agreement.
The Escrow Agent is responsible for collecting payments under the
Acquired Purchase Contracts purchased from TRENDWEST RESORTS, INC. This
agreement provides for the designation of a Lock Box Agent which collects the
funds and forwards the funds directly to the Buyer for the account of the Buyer.
Seller has delivered the Purchase Contracts Receivable described in the
Agreement to the Escrow Agent.
This agreement requires the establishment of a reserve pool of purchase
contracts receivable in the amount of $10,000.00 at any time in order to
facilitate the replacement contracts described in Section 3 herein. Seller has
established this reserve pool.
The parties desire to establish a procedure pursuant to which Escrow
Agent holds the Acquired Purchase Contracts, collects the payments, disburses
the funds to the Buyer and Seller according to the terms herein, submits reports
regarding payment status and makes demands upon the reserve pool established by
Seller when required under this agreement.
NOW, THEREFORE, the parties agree that Escrow Agent holds the Acquired
Purchase Contracts described in the Agreement and instruments delivered pursuant
thereto, subject to the following terms and conditions:
1. Seller will deliver to Escrow Agent, as agent of the Buyer, all
Acquired Purchase Contracts designated as part of this purchase, and
Escrow Agent will hold the same on Buyer's behalf, to perfect Buyer's
security interest related thereto
-1-
<PAGE> 2
and otherwise as directed by the Buyer pursuant to the Agreement and
related documents.
2. The Escrow Agent shall collect all principal and interest and other
payments under the Acquired Purchase Contracts when and as they become
due from the various obligors and remit the monies to the Buyer and
Seller as described herein on or before the fifth (5th) day of each
month.
3. The Escrow Agent shall keep and maintain proper books of record and
account in which full, true, and correct entries shall be made of all
transactions relating to the Acquired Purchase Contracts.
4. The Escrow Agent shall submit reports to the Buyer and Seller covering
all transactions relating to the Acquired Purchase Contracts during
each calendar quarter (monthly if possible). Such reports shall be
submitted not later than the 15th day of January, April, July, and
October each year for the respective preceding calendar quarters.
5. Seller will continue to assure that a Lock Box Agreement remains in
full force and effect and that the Lock Box Agent reports regarding
payments received, including without limitation failures to make
payments, or late payments and charges, identifying the particular
Timeshare Interest and Acquired Purchase Contracts.
6. Seller shall assure that real properties taxes are paid as they become
due and fire/hazard insurance is furnished and maintained for the
benefit of the Seller on each property related to the Acquired Purchase
Contracts.
7. The Seller shall promptly notify the Buyer if and when any of the
following events or conditions affecting any of the Acquired Purchase
Contracts shall come to Seller's attention.
(a) Any loss or damage by fire or other hazard to properties covered
by the Acquired Purchase Contracts.
(b) Any deterioration or waste suffered or committed in respect to any
such property.
(c) Any other matter which would adversely affect the value of any
such property.
(d) Any failure of any obligor to make payment within the grace period
provided in the Acquired Purchase Contracts or other failure
continuing for more than 30 days to perform any covenant or other
obligation contained in the Acquired Purchase Contract which in
Seller's judgment requires enforcement against the obligor.
-2-
<PAGE> 3
(e) Any claim of default by any "Timeshare Purchaser" under an
Acquired Purchase Contract.
(f) The institution by or against any Timeshare Purchaser of any
bankruptcy or other insolvency proceedings.
8. Escrow Agent will review the report submitted by the Lock Box Agent and
determine whether any payment due under any Acquired Purchase Contract
held by Escrow Agent is delinquent for more than 90 days. If any
Acquired Purchase Contract is delinquent with respect to payment for
more than 90 days, then Escrow Agent shall immediately demand of Seller
a replacement Qualified Purchase Contract of the same or greater value.
"Qualified Purchase Contract" shall be defined as a contract receivable
or collateral note owned by Seller that is not in default or is not
subject to any of the specific events described in Paragraph 7 herein.
Escrow Agent shall notify the Buyer of the demand. If Seller fails to
provide a Qualified Purchase Contract of the same or greater value
(such qualification and value to be determined by Seller) within 15
days after demand, then Escrow Agent shall notify Seller and the Buyer
in writing of the failure. In the event the Seller submits a Qualified
Purchase Contract from the reserve pool described above, the Seller
shall restore the reserve pool to the $50,000.00 level described
hereinabove. Escrow Agent is not required to do more than send the
demand and other notices described in this Agreement, and in particular
is not required to bring suit or otherwise take any action with respect
to any failure to respond to written notices or demands.
9. Upon tender of Qualified Purchase Contract, Escrow Agent will assure
that Seller receives the original Acquired Purchase Contract and all
other documents described as an "Acquired Purchase Contract" under this
agreement. The Buyer will deliver to or otherwise make available to
Seller any purchase agreements, security agreements, or copies thereof
and other documents in its possession as Seller may reasonably need to
enforce the same against any obligor or Timeshare Purchaser. A copy of
the standard documents used are attached hereto as exhibits.
10. Seller shall not add to, modify, or waive any of the terms, conditions,
or other provisions of any of the Acquired Purchase Contracts without
the prior written consent of Buyer.
11. For the services rendered hereunder, Seller agrees to pay Escrow Agent
any and all escrow fees to set up or replace Acquired Purchase
Contracts held in the escrow.
12. Seller shall perform all services required hereunder without further
charge, and may retain, provided Seller is not in default under the
Agreement or any agreement related thereto:
-3-
<PAGE> 4
(a) Fifty percent of any late payment charges arising by failure of
the Timeshare Purchaser to make timely payments of principal and
interest.
(b) Fees for change of ownership, substitution of insurance policies,
modifications, mortgagee's statements, other default penalties and
amounts payable by Timeshare Purchasers, and any other fees or
charges arising out of the servicing of the Acquired Purchase
Contracts.
Prepayment penalties, if any, shall be paid to the Buyer.
13. The Buyer shall have the option at any time upon notice to Seller and
Escrow Agent to terminate this servicing arrangement and to service the
Acquired Purchase Contracts itself or through others. If the Buyer
should so elect, Seller and Escrow Agent shall immediately return to
Buyer, without charge, all Acquired Purchase Contracts and papers,
documents and funds, if any, then held by Seller and Escrow Agent with
respect to the Acquired Purchase Contracts.
This Servicing Escrow Agreement shall have no force and effect unless
and until signed by all three parties hereto (by counterpart) , in the space
provided below, but will thereafter bind the successors and assigns of each
party.
Buyer:
____________________________
Jewel W. Kintzinger
Seller: TRENDWEST RESORTS, INC.
By:_________________________
Its:________________________
Escrow Agent: SAGE SYSTEMS, INC.
By:_________________________
Its:________________________
-4-
<PAGE> 5
BILL OF SALE
FOR VALUE RECEIVED, TRENDWEST RESORTS, INC., a Washington corporation
(referred to herein as "Seller") sell, assign and transfer to Jewel W.
Kintzinger (collectively referred to as "Buyer"), all of Seller's right, title
and interest in the Acquired Purchase Contracts as of the Effective Time. The
property being conveyed pursuant to this Bill of Sale is listed on Appendix "A",
attached hereto.
This Bill of Sale is given pursuant to that certain Purchase Agreement
dated as of October 12, 1993, between Seller and Buyers ("Agreement"), which is
incorporated herein by reference and which contains certain warranties and
disclaimers applicable for this instrument. All capitalized terms in this Bill
of Sale shall have the meanings specified in the Agreement.
DATED this 12th day of October, 1993.
TRENDWEST RESORTS, INC.
By:______________________
Its:_____________________
-5-
<PAGE> 6
ASSIGNMENT AND ASSUMPTION AGREEMENT
FOR VALUE RECEIVED, (i) TRENDWEST RESORTS, INC., a Washington
corporation and (referred to herein as "Assignor"), assign, transfer and set
over to Jewel W. Kintzinger (referred to as "Assignee"), all of Assignor's
right, title and interest as of the Effective Time in the Acquired Purchase
Contracts described in that certain Purchase Agreement dated as of October 12,
1993 between Assignor and Assignee ("Agreement"), and listed in the attached
Schedule; and (ii) the Assignee hereby assumes and agrees to perform all
obligations of Assignor under said contracts, which arise or mature after the
Effective Time.
This Assignment and Assumption Agreement is executed pursuant to the
Agreement, which contains warranties, rights and limitations with respect to the
obligations assigned and assumed hereunder and which Agreement is incorporated
herein by this reference. All capitalized terms in this instrument shall have
the meanings set forth in the Agreement, unless separately defined herein.
DATED this 12th day of October, 1993.
ASSIGNEE: ASSIGNOR:
TRENDWEST RESORTS, INC.
______________________
Jewel W. Kintzinger
By:________________________
Its:_______________________
-6-
<PAGE> 1
ENDORSED
FILED
In the office of the Secretary of State
of the State of California
DEC 11 1992
MARCH FONG EU, Secretary of State
EXHIBIT 10.24
CERTIFICATE OF RESTATED
ARTICLES OF INCORPORATION OF
CLUB ESPRIT
WILLIAM F. PEARE and J. MICHAEL MOYER certify that:
I. Officers. They are the president and the secretary,
respectively, of CLUB ESPRIT, a California nonprofit mutual benefit
corporation.
II. Restatement and Amendment. The Articles of Incorporation of
this corporation are amended and restated to read as follows:
I
NAME
----
The name of this corporation is WorldMark, The Club.
II
PURPOSE
-------
1. This corporation is a nonprofit mutual benefit corporation
organized under the Nonprofit Mutual Benefit Corporation Law. The
purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under such law.
2. The specific and primary purpose for which the corporation is
formed is to care for, own, lease, maintain, operate and manage the real
property and Improvements thereon and personal property therein or which
it owns, wherever located, which has been dedicated to the WORLDMARK,
THE CLUB VACATION OWNER PROGRAM by a Declaration recorded by TRENDWEST
RESORTS, INC. ("Declarant"), and Oregon corporation.
3. Notwithstanding any of the above statements of purposes and
powers, this corporation shall not, except to an insubstantial degree,
engage in any activities or exercise any powers that are not in
furtherance of the specific purpose of this corporation.
III
NONPROFIT STATUS
----------------
No part of the net earnings of the corporation shall benefit
any private member or individual (other than by
<PAGE> 2
acquiring, constructing, or providing management, maintenance, and care of
property held by the corporation, or by a rebate of excess membership dues,
fees, or assessments).
IV
AMENDMENT
---------
Amendment of these Articles of Incorporation requires the affirmative
vote or written assent of a majority of the board of directors; and (1) a
majority of the Voting Power of each Class of members, if there is more
than one class, or (2) if there is only one Class of Members, a majority of
the Voting Power of Members other than Declarant, or its successor, plus
the approval of a majority of the total Voting Power. Provided, however,
that the votes required for an amendment shall not be less than the
affirmative votes required for action to be taken under the clause being
affected.
III. Directors. The foregoing amendment and restatement has been duly
approved by the board of directors.
IV. Members. The foregoing amendment and restatement has been duly
approved by the required vote of the members.
Verification. Each of the undersigned declares under penalty of
perjury that the statements contained in the foregoing certificate are true and
correct of his own knowledge, and that this declaration was executed on
December 10, 1992, at Kirkland, Washington.
/s/ WILLIAM F. PEARE
---------------------------
William F. Peare, President
/s/ J. MICHAEL MOYER
---------------------------
J. Michael Moyer, Secretary
2
<PAGE> 1
EXHIBIT 10.27
FORM OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This agreement is dated and made effective the May 1, 1997 (the
"Effective Date") between William Peare, ("Executive") and Trendwest Resorts,
Inc., an Oregon corporation ("Company").
1. Employment. Company employs Executive and Executive accepts
employment on the terms and conditions in this agreement.
2. Duties. Executive is employed in the capacity of President and
Chief Executive Officer. In this capacity Executive shall have primary
responsibility for direction and guidance of Company and implementation of
Company's business strategies. Executive shall report directly to, and take
direction from, Company's Board of Directors (the "Board") and to no other
Company employee. Executive shall perform the duties customarily performed by a
president and CEO.
3. Intensity of Effort; Other Business. Executive shall devote his
entire working time, attention and efforts to Company's business and affairs,
shall faithfully and diligently serve Company's interests and shall not engage
in any business or employment activity that is not on Company's behalf (whether
or not pursued for gain or profit) except for (a) activities approved in writing
in advance by the Board and (b) passive investments that do not involve
Executive providing any advice or services to the businesses in which the
investments are made.
4. Term. The term of this agreement is of indefinite duration. As
stated in P. 8 below, this agreement and Executive's employment relationship may
be terminated at any time, with or without cause.
5. Compensation. Executive's compensation shall be as follows:
(a) Executive's salary shall be $4,166.67 payable
semi-monthly (equal to $100,000.00 on an annualized basis) in accordance with
the Company's standard procedures. Executive's salary shall be reviewed by the
Board and adjusted as determined by the Board in its sole discretion.
(b) Executive will be eligible to receive a monthly personal
performance bonus as determined by the Company's Board based upon performance
criteria consistent with those criteria utilized to establish Executive's bonus
in prior years. The personal performance bonus, if any, shall be paid thirty
(30) days following the end of each month. The total bonus payable for any
twelve month period shall not exceed two times Executive's base salary for such
twelve month period.
6. Benefit Plans. Executive shall be eligible to participate in the
Company's Employee Benefit Package offered generally to employees. The exact
terms and conditions of the Company's benefits, including eligibility, are
governed by the benefit plans and policies of the Company, not this agreement or
any summary provided to Executive.
7. Business Expenses. Executive is authorized to incur reasonable
travel and entertainment expenses to promote Company's business. Company shall
reimburse Executive for those expenses consistent with the Company's policies
and procedures. Executive shall provide to Company the itemized expense account
information that Company reasonably requests.
8. Termination. Executive's employment may be terminated as
follows, in which event Executive's compensation and benefits shall terminate
except as otherwise provided below:
-1-
<PAGE> 2
(a) Without Cause or Good Reason. Either party may terminate
Executive's employment at any time by giving 30 calendar days' advance written
notice of termination to the other without the necessity of cause or good
reason.
(b) By Company for Cause. Company may terminate Executive's
employment for cause, without advance written notice of termination, by giving
written notice of such termination. The notice may take effect immediately or at
such later date as Company may designate. Any termination of Executive's
employment for cause must be approved by a majority of the Board other than
Executive. For purposes of this Agreement, "cause" means gross negligence,
wilful misconduct, fraud or material breach of the Company's written policies
and procedures or of this Agreement. Executive must be given reasonable advance
notice of the meeting at which his or her termination is to be considered, and a
reasonable opportunity to address the Board.
(c) Death. Executive's employment shall terminate
automatically upon Executive's death.
(d) Permanent Disability. Company may terminate Executive's
employment immediately if Executive becomes permanently disabled. For purposes
of this agreement Executive will be considered "permanently disabled" if, for a
continuous period of 24 weeks or more, Executive has been unable to perform the
essential functions of the job because of one or more mental or physical
illnesses and/or disabilities, provided that Company may grant Executive unpaid
leave if and to the extent that, in Company's judgment, doing so is required by
law.
9. Termination Payments.
(a) Termination Without Cause.
(i) If Company terminates Executive's employment
when neither cause nor permanent disability exists, Company shall pay Executive
for a period of twelve (12) months following such termination, as liquidated
damages and in lieu of all other remedies to which Executive might be entitled
arising out of the termination, termination payments equal to Executive's
monthly salary at the date of termination (these payments exclude bonuses and
any other incentive compensation) plus the amount of bonuses received by
Executive in the twelve month period preceding termination, pro rated on a
monthly basis over the twelve month payment period. Such liquidated damages
shall be paid only if Executive executes a full and final general release of all
claims against Company (including Company's officers, directors, agents,
employees and assigns) arising out of Executive's employment relationship with
Company.
(ii) In addition, if Company terminates Executive's
employment when neither cause nor permanent disability exists, but Company gives
Executive less than the 30 days' advance written notice called for above,
Company shall pay Executive, as liquidated damages and in lieu of all other
remedies to which Executive might be entitled arising out of Company's failure
to give 30 days' advance written notice, termination payments equal to the
additional salary Executive would have received if Company had given Executive
30 days' advance written notice of termination.
(iii) Termination payments shall be paid out on
regular payroll days subject to normal payroll deductions, commencing first with
the termination payments called for by subpart (ii), if any, followed by the
termination payments called for by subpart (i).
-2-
<PAGE> 3
(b) All Other Terminations. In all other cases of
termination or expiration of this agreement or of Executive's employment
(including a termination of Executive by Company for Cause, Executive's
resignation of employment or Executive's permanent disability or death),
Executive's compensation and benefits shall terminate on the date the employment
ends and Executive shall not be entitled to any termination payments or damages.
10. Confidentiality. Executive agrees that information not generally
known to the public to which Executive has been or will be exposed as a result
of Executive's employment by Company is confidential information that belongs to
Company. This includes information developed by Executive, alone or with others,
or entrusted to Company by its customers or others. Company's confidential
information includes, without limitation, customer contacts and files,
information relating to Company's trade secrets, know-how, procedures,
purchasing, accounting, marketing, sales, customers and employees. Executive
will hold Company's confidential information in strict confidence and will not
disclose or use it except as authorized by Company and for Company's benefit.
Executive shall not obtain, keep, use for Company's benefit or disclose to
Company any confidential, proprietary or trade secret information that belongs
to others, unless the party who has the rights to the information expressly
consents in writing in advance. Executive warrants that he is not a party to any
agreements, such as noncompetition agreements, that would limit his ability to
perform his duties for Company.
11. Possession of Materials. Executive agrees that upon conclusion
of employment or request by Company, Executive shall turn over to Company all
documents, files, office supplies and any other material or work product in
Executive's possession or control that were created pursuant to or derived from
Executive's services for Company.
12. Noncompetition. Executive agrees that Company has many
substantial, legitimate business interests that can be protected only by
Executive agreeing not to compete with Company under certain circumstances.
These interests include, without limitation, Company's contacts and
relationships with its customers, Company's reputation and goodwill in the
industry, and Company's rights in its confidential information. In consideration
of the promises in this agreement, together with the stock option agreement,
Executive therefore agrees that for twenty four (24) months after Executive's
employment with Company ends, regardless of the reason it ends, Executive shall
not, directly or indirectly (a) acquire, service, advise or conduct any business
in the United States competitive with Company's business acquiring, developing,
marketing or selling timeshare interests or properties, or (b) be an employee,
employer, consultant, officer, director, partner, trustee or shareholder of more
than 5% of the outstanding common stock of any person or entity that acquires,
services, advises or conducts any such business.
13. Nonraiding of Employees. Executive recognizes that Company's
workforce is a vital part of its business. Therefore, Executive agrees that for
24 months after Executive's employment with Company ends, regardless of the
reason it ends, Executive will not solicit, directly or indirectly, any employee
to leave his or her employment with Company. For purposes of this agreement, the
phrase "shall not solicit, directly or indirectly," includes, without
limitation, that Executive (a) shall not identify any Company employees to any
third party as potential candidates for employment, such as by disclosing the
names, backgrounds and qualifications of any Company employees; (b) shall not
personally or through any other person approach, recruit or otherwise solicit
employees of Company to work for any other employer; and (c) shall not
participate in any preemployment interviews with any person who was employed by
Company while Executive was employed or retained by Company.
14. Dispute Resolution. Company and Executive agree to resolve all
disputes arising out of their employment relationship by the following alternate
dispute resolution process: (a) Company and
-3-
<PAGE> 4
Executive agree to seek a fair and prompt negotiated resolution; but if this is
not successful, (b) all disputes shall be resolved by binding arbitration;
provided that during this process, (c) at the request of either party, made not
later than 75 days after the initial arbitration demand, the parties agree to
attempt to resolve any dispute by non-binding third-party intervention including
either mediation or evaluation or both (but without delaying the arbitration
hearing date). By entering into this contract, both parties give up their right
to have the dispute decided in court by a judge or jury. The provisions of the
Washington arbitration statute, Chapter 7.04 RCW, are incorporated herein to the
extent not inconsistent with the other terms of this agreement.
(a) Binding Arbitration. Any controversy or claim arising
out of or connected with Executive's employment at Company, including but not
limited to claims for compensation or severance and claims of wrongful
termination, age, sex, racial or other discrimination, or civil rights
violations shall be determined by arbitration commenced in accordance with RCW
7.04.060, provided that the total award by a single arbitrator (as opposed to a
majority of three arbitrators) shall not exceed $250,000. If either party
asserts in good faith that it is entitled to an award over $250,000, there shall
be three arbitrators. The location of the arbitration shall be Seattle,
Washington, or such other city to which the parties may agree. If Company and
Executive cannot agree on the arbitrator(s), then the arbitrator(s) shall be
selected by the administrator of the American Arbitration Association (AAA)
office nearest the city where the arbitration is to be conducted. Each
arbitrator shall be an attorney with at least 15 years' experience in commercial
law. All statutes of limitations which would otherwise be applicable shall apply
to any arbitration proceeding hereunder. Any issue about whether a controversy
or claim is covered by this agreement shall be determined by the arbitrator(s).
(b) Procedures. The arbitration shall be conducted in
accordance with this agreement using as appropriate the AAA Employment Dispute
Resolution Rules in effect on the date hereof. There shall be no discovery or
dispositive motion practice (such as motions for summary judgment or to dismiss
or the like) except the arbitrator(s) shall authorize such discovery as may be
shown to be necessary to ensure a fair hearing, and no such discovery shall
extend the time limits contained herein. The arbitrator(s) shall not be bound by
the rules of evidence or of civil procedure, but rather may consider such
writings and oral presentations as reasonable business people would use in the
conduct of their day-to-day affairs, and may require both parties to submit some
or all of their respective cases by written declaration or such other manner of
presentation as the arbitrator(s) may determine to be appropriate. The parties
agree to limit live testimony and cross-examination to the extent necessary to
ensure a fair hearing on material issues.
(c) Hearing -- Law -- Appeal Limited. The arbitrator(s)
shall take such steps as may be necessary to hold a private hearing within one
hundred twenty (120) days of the initial request for arbitration and to conclude
the hearing within two (2) days; and the arbitrator(s)'s written decision shall
be made not later than fourteen (14) calendar days after the hearing. The
parties agree that they have included these time limits in order to expedite the
proceeding, but they are not jurisdictional, and the arbitrator(s) may for good
cause allow reasonable extensions or delays, which shall not affect the validity
of the award. The written decision shall contain a brief statement of the
claim(s) determined and the award made on each claim. In making the decision and
award the arbitrator(s) shall apply applicable substantive law. Absent fraud,
collusion or willful misconduct by an arbitrator, the award shall be final and
judgment may be entered in any court having jurisdiction thereof. The
arbitrator(s) may award injunctive relief or any other remedy available from a
judge, including the joinder of parties or consolidation of this arbitration
with any other involving common issues of law or fact or which may promote
judicial economy, and may award attorneys' fees and costs to the prevailing
party, but shall not have the power to award punitive or exemplary damages. The
decision and award of the arbitrators need not be unanimous; rather, the
decision and award of two arbitrators shall be final.
-4-
<PAGE> 5
(d) Injunctive Relief. In the case of a breach of any of
Executive's obligations to Company, Company may request a court of competent
jurisdiction to issue such temporary or interim relief (including temporary
restraining orders and preliminary injunctions) as may be appropriate, either
before arbitration is commenced or pending the outcome of arbitration. No such
request shall be a waiver of the right to submit any claim or controversy to
arbitration. Any issues of law or fact which arise in connection with such
request shall, at Company's election, be determined by arbitration in accordance
with subparagraphs (a) through (c) above.
15. Attorneys' Fees; Venue and Jurisdiction. In any lawsuit or
arbitration arising out of or relating to this agreement or Executive's
employment, including without limitation arising from any alleged tort or
statutory violation, the prevailing party shall recover reasonable costs and
attorneys' fees, including on appeal. Venue and jurisdiction of any lawsuit
involving this agreement or Executive's employment shall exist exclusively in
state and federal courts in King County, Washington, unless injunctive relief is
sought by Company and, in Company's judgment, that relief might not be effective
unless obtained in some other venue. The provisions of this section are subject
to and do not supersede the dispute resolution provisions described above.
16. Governing Law. This agreement shall be governed by the internal
laws of the state of Washington without giving effect to provisions thereof
related to choice of laws or conflict of laws.
17. Saving Provision. If any part of this agreement is held to be
unenforceable, it shall not affect any other part. If any part of this agreement
is held to be unenforceable as written, it shall be enforced to the maximum
extent allowed by applicable law. The confidentiality, possession of materials,
noncompetition and nonraiding provisions of this agreement shall survive after
Executive's employment by Company ends, regardless of the reason it ends, and
shall be enforceable regardless of any claim Executive may have against Company.
18. Waiver. No waiver of any provision of this agreement shall be
valid unless in writing, signed by the party against whom the waiver is sought
to be enforced. The waiver of any breach of this agreement or failure to enforce
any provision of this agreement shall not waive any later breach.
19. Assignment; Successors. Company may assign its rights and
delegate its duties under this agreement. Executive may not assign his or her
rights or delegate his or her duties under this agreement.
20. Binding Effect. This agreement is binding upon the parties and
their personal representatives, heirs, successors and assigns.
21. Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, taken
together, shall constitute a single agreement.
22. Complete Agreement. This agreement is the final and complete
expression of the parties' agreement relating to Executive's employment. This
agreement may be amended only by a writing signed by both parties; it may not be
amended orally or by course of dealing. The parties are not entering into this
agreement relying on anything not set out in this agreement. This agreement
shall control over any
-5-
<PAGE> 6
contrary policies or procedures of Company, whether in effect now or adopted
later. Company's policies and procedures that do not conflict with this
agreement, whether in effect now or adopted later, shall apply or not apply to
Executive as determined by Company in its discretion.
DATED as of the date first written above.
EXECUTIVE COMPANY
William Peare Trendwest Resorts, Inc.
____________________________ By: __________________________
President
-6-
<PAGE> 1
EXHIBIT 10.28
FORM OF
EMPLOYMENT AND NONCOMPETITION AGREEMENT
This agreement is dated and made effective the May 1, 1997 (the
"Effective Date") between Jeffrey Sites, ("Executive") and Trendwest Resorts,
Inc., an Oregon corporation ("Company").
1. Employment. Company employs Executive and Executive accepts
employment on the terms and conditions in this agreement.
2. Duties. Executive is employed in the capacity of Executive Vice
President. In this capacity Executive shall have primary responsibility for
direction and guidance of Company's operations and implementation of the
Company's operating strategies. Executive shall report directly to, and take
direction from, Company's President and Board of Directors (the "Board") and to
no other Company employee. Executive shall perform the duties customarily
performed by an executive vice president.
3. Intensity of Effort; Other Business. Executive shall devote his
entire working time, attention and efforts to Company's business and affairs,
shall faithfully and diligently serve Company's interests and shall not engage
in any business or employment activity that is not on Company's behalf (whether
or not pursued for gain or profit) except for (a) activities approved in writing
in advance by the Board and (b) passive investments that do not involve
Executive providing any advice or services to the businesses in which the
investments are made.
4. Term. The term of this agreement is of indefinite duration. As
stated in P. 8 below, this agreement and Executive's employment relationship may
be terminated at any time, with or without cause.
5. Compensation. Executive's compensation shall be as follows:
(a) Executive's salary shall be $3,125.00 payable
semi-monthly (equal to $75,000.00 on an annualized basis) in accordance with the
Company's standard procedures. Executive's salary shall be reviewed by the Board
and adjusted as determined by the Board in its sole discretion.
(b) Executive will be eligible to receive a monthly personal
performance bonus as determined by the Company's Board based upon performance
criteria consistent with those criteria utilized to establish Executive's bonus
in prior years. The personal performance bonus, if any, shall be paid thirty
(30) days following the end of each month. The total bonus payable for any
twelve month period shall not exceed two times Executive's base salary for such
twelve month period.
6. Benefit Plans. Executive shall be eligible to participate in the
Company's Employee Benefit Package offered generally to employees. The exact
terms and conditions of the Company's benefits, including eligibility, are
governed by the benefit plans and policies of the Company, not this agreement or
any summary provided to Executive.
7. Business Expenses. Executive is authorized to incur reasonable
travel and entertainment expenses to promote Company's business. Company shall
reimburse Executive for those expenses consistent with the Company's policies
and procedures. Executive shall provide to Company the itemized expense account
information that Company reasonably requests.
8. Termination. Executive's employment may be terminated as
follows, in which event Executive's compensation and benefits shall terminate
except as otherwise provided below:
-1-
<PAGE> 2
(a) Without Cause or Good Reason. Either party may terminate
Executive's employment at any time by giving 30 calendar days' advance written
notice of termination to the other without the necessity of cause or good
reason.
(b) By Company for Cause. Company may terminate Executive's
employment for cause, without advance written notice of termination, by giving
written notice of such termination. The notice may take effect immediately or at
such later date as Company may designate. Any termination of Executive's
employment for cause must be approved by a majority of the Board other than
Executive. For purposes of this Agreement, "cause" means gross negligence,
wilful misconduct, fraud or material breach of the Company's written policies
and procedures or of this Agreement. Executive must be given reasonable advance
notice of the meeting at which his or her termination is to be considered, and a
reasonable opportunity to address the Board.
(c) Death. Executive's employment shall terminate
automatically upon Executive's death.
(d) Permanent Disability. Company may terminate Executive's
employment immediately if Executive becomes permanently disabled. For purposes
of this agreement Executive will be considered "permanently disabled" if, for a
continuous period of 24 weeks or more, Executive has been unable to perform the
essential functions of the job because of one or more mental or physical
illnesses and/or disabilities, provided that Company may grant Executive unpaid
leave if and to the extent that, in Company's judgment, doing so is required by
law.
9. Termination Payments.
(a) Termination Without Cause.
(i) If Company terminates Executive's employment
when neither cause nor permanent disability exists, Company shall pay Executive
for a period of twelve (12) months following such termination, as liquidated
damages and in lieu of all other remedies to which Executive might be entitled
arising out of the termination, termination payments equal to Executive's
monthly salary at the date of termination (these payments exclude bonuses and
any other incentive compensation) plus the amount of bonuses received by
Executive in the twelve month period preceding termination, pro rated on a
monthly basis over the twelve month payment period. Such liquidated damages
shall be paid only if Executive executes a full and final general release of all
claims against Company (including Company's officers, directors, agents,
employees and assigns) arising out of Executive's employment relationship with
Company.
(ii) In addition, if Company terminates Executive's
employment when neither cause nor permanent disability exists, but Company gives
Executive less than the 30 days' advance written notice called for above,
Company shall pay Executive, as liquidated damages and in lieu of all other
remedies to which Executive might be entitled arising out of Company's failure
to give 30 days' advance written notice, termination payments equal to the
additional salary Executive would have received if Company had given Executive
30 days' advance written notice of termination.
(iii) Termination payments shall be paid out on
regular payroll days subject to normal payroll deductions, commencing first with
the termination payments called for by subpart (ii), if any, followed by the
termination payments called for by subpart (i).
-2-
<PAGE> 3
(b) All Other Terminations. In all other cases of
termination or expiration of this agreement or of Executive's employment
(including a termination of Executive by Company for Cause, Executive's
resignation of employment or Executive's permanent disability or death),
Executive's compensation and benefits shall terminate on the date the employment
ends and Executive shall not be entitled to any termination payments or damages.
10. Confidentiality. Executive agrees that information not generally
known to the public to which Executive has been or will be exposed as a result
of Executive's employment by Company is confidential information that belongs to
Company. This includes information developed by Executive, alone or with others,
or entrusted to Company by its customers or others. Company's confidential
information includes, without limitation, customer contacts and files,
information relating to Company's trade secrets, know-how, procedures,
purchasing, accounting, marketing, sales, customers and employees. Executive
will hold Company's confidential information in strict confidence and will not
disclose or use it except as authorized by Company and for Company's benefit.
Executive shall not obtain, keep, use for Company's benefit or disclose to
Company any confidential, proprietary or trade secret information that belongs
to others, unless the party who has the rights to the information expressly
consents in writing in advance. Executive warrants that he is not a party to any
agreements, such as noncompetition agreements, that would limit his ability to
perform his duties for Company.
11. Possession of Materials. Executive agrees that upon conclusion
of employment or request by Company, Executive shall turn over to Company all
documents, files, office supplies and any other material or work product in
Executive's possession or control that were created pursuant to or derived from
Executive's services for Company.
12. Noncompetition. Executive agrees that Company has many
substantial, legitimate business interests that can be protected only by
Executive agreeing not to compete with Company under certain circumstances.
These interests include, without limitation, Company's contacts and
relationships with its customers, Company's reputation and goodwill in the
industry, and Company's rights in its confidential information. In consideration
of the promises in this agreement, together with the stock option agreement,
Executive therefore agrees that for twenty four (24) months after Executive's
employment with Company ends, regardless of the reason it ends, Executive shall
not, directly or indirectly (a) acquire, service, advise or conduct any business
in the United States competitive with Company's business acquiring, developing,
marketing or selling timeshare interests or properties, or (b) be an employee,
employer, consultant, officer, director, partner, trustee or shareholder of more
than 5% of the outstanding common stock of any person or entity that acquires,
services, advises or conducts any such business.
13. Nonraiding of Employees. Executive recognizes that Company's
workforce is a vital part of its business. Therefore, Executive agrees that for
24 months after Executive's employment with Company ends, regardless of the
reason it ends, Executive will not solicit, directly or indirectly, any employee
to leave his or her employment with Company. For purposes of this agreement, the
phrase "shall not solicit, directly or indirectly," includes, without
limitation, that Executive (a) shall not identify any Company employees to any
third party as potential candidates for employment, such as by disclosing the
names, backgrounds and qualifications of any Company employees; (b) shall not
personally or through any other person approach, recruit or otherwise solicit
employees of Company to work for any other employer; and (c) shall not
participate in any preemployment interviews with any person who was employed by
Company while Executive was employed or retained by Company.
14. Dispute Resolution. Company and Executive agree to resolve all
disputes arising out of their employment relationship by the following alternate
dispute resolution process: (a) Company and
-3-
<PAGE> 4
Executive agree to seek a fair and prompt negotiated resolution; but if this is
not successful, (b) all disputes shall be resolved by binding arbitration;
provided that during this process, (c) at the request of either party, made not
later than 75 days after the initial arbitration demand, the parties agree to
attempt to resolve any dispute by non-binding third-party intervention including
either mediation or evaluation or both (but without delaying the arbitration
hearing date). By entering into this contract, both parties give up their right
to have the dispute decided in court by a judge or jury. The provisions of the
Washington arbitration statute, Chapter 7.04 RCW, are incorporated herein to the
extent not inconsistent with the other terms of this agreement.
(a) Binding Arbitration. Any controversy or claim arising
out of or connected with Executive's employment at Company, including but not
limited to claims for compensation or severance and claims of wrongful
termination, age, sex, racial or other discrimination, or civil rights
violations shall be determined by arbitration commenced in accordance with RCW
7.04.060, provided that the total award by a single arbitrator (as opposed to a
majority of three arbitrators) shall not exceed $250,000. If either party
asserts in good faith that it is entitled to an award over $250,000, there shall
be three arbitrators. The location of the arbitration shall be Seattle,
Washington, or such other city to which the parties may agree. If Company and
Executive cannot agree on the arbitrator(s), then the arbitrator(s) shall be
selected by the administrator of the American Arbitration Association (AAA)
office nearest the city where the arbitration is to be conducted. Each
arbitrator shall be an attorney with at least 15 years' experience in commercial
law. All statutes of limitations which would otherwise be applicable shall apply
to any arbitration proceeding hereunder. Any issue about whether a controversy
or claim is covered by this agreement shall be determined by the arbitrator(s).
(b) Procedures. The arbitration shall be conducted in
accordance with this agreement using as appropriate the AAA Employment Dispute
Resolution Rules in effect on the date hereof. There shall be no discovery or
dispositive motion practice (such as motions for summary judgment or to dismiss
or the like) except the arbitrator(s) shall authorize such discovery as may be
shown to be necessary to ensure a fair hearing, and no such discovery shall
extend the time limits contained herein. The arbitrator(s) shall not be bound by
the rules of evidence or of civil procedure, but rather may consider such
writings and oral presentations as reasonable business people would use in the
conduct of their day-to-day affairs, and may require both parties to submit some
or all of their respective cases by written declaration or such other manner of
presentation as the arbitrator(s) may determine to be appropriate. The parties
agree to limit live testimony and cross-examination to the extent necessary to
ensure a fair hearing on material issues.
(c) Hearing -- Law -- Appeal Limited. The arbitrator(s)
shall take such steps as may be necessary to hold a private hearing within one
hundred twenty (120) days of the initial request for arbitration and to conclude
the hearing within two (2) days; and the arbitrator(s)'s written decision shall
be made not later than fourteen (14) calendar days after the hearing. The
parties agree that they have included these time limits in order to expedite the
proceeding, but they are not jurisdictional, and the arbitrator(s) may for good
cause allow reasonable extensions or delays, which shall not affect the validity
of the award. The written decision shall contain a brief statement of the
claim(s) determined and the award made on each claim. In making the decision and
award the arbitrator(s) shall apply applicable substantive law. Absent fraud,
collusion or willful misconduct by an arbitrator, the award shall be final and
judgment may be entered in any court having jurisdiction thereof. The
arbitrator(s) may award injunctive relief or any other remedy available from a
judge, including the joinder of parties or consolidation of this arbitration
with any other involving common issues of law or fact or which may promote
judicial economy, and may award attorneys' fees and costs to the prevailing
party, but shall not have the power to award punitive or exemplary damages. The
decision and award of the arbitrators need not be unanimous; rather, the
decision and award of two arbitrators shall be final.
-4-
<PAGE> 5
(d) Injunctive Relief. In the case of a breach of any of
Executive's obligations to Company, Company may request a court of competent
jurisdiction to issue such temporary or interim relief (including temporary
restraining orders and preliminary injunctions) as may be appropriate, either
before arbitration is commenced or pending the outcome of arbitration. No such
request shall be a waiver of the right to submit any claim or controversy to
arbitration. Any issues of law or fact which arise in connection with such
request shall, at Company's election, be determined by arbitration in accordance
with subparagraphs (a) through (c) above.
15. Attorneys' Fees; Venue and Jurisdiction. In any lawsuit or
arbitration arising out of or relating to this agreement or Executive's
employment, including without limitation arising from any alleged tort or
statutory violation, the prevailing party shall recover reasonable costs and
attorneys' fees, including on appeal. Venue and jurisdiction of any lawsuit
involving this agreement or Executive's employment shall exist exclusively in
state and federal courts in King County, Washington, unless injunctive relief is
sought by Company and, in Company's judgment, that relief might not be effective
unless obtained in some other venue. The provisions of this section are subject
to and do not supersede the dispute resolution provisions described above.
16. Governing Law. This agreement shall be governed by the internal
laws of the state of Washington without giving effect to provisions thereof
related to choice of laws or conflict of laws.
17. Saving Provision. If any part of this agreement is held to be
unenforceable, it shall not affect any other part. If any part of this agreement
is held to be unenforceable as written, it shall be enforced to the maximum
extent allowed by applicable law. The confidentiality, possession of materials,
noncompetition and nonraiding provisions of this agreement shall survive after
Executive's employment by Company ends, regardless of the reason it ends, and
shall be enforceable regardless of any claim Executive may have against Company.
18. Waiver. No waiver of any provision of this agreement shall be
valid unless in writing, signed by the party against whom the waiver is sought
to be enforced. The waiver of any breach of this agreement or failure to enforce
any provision of this agreement shall not waive any later breach.
19. Assignment; Successors. Company may assign its rights and
delegate its duties under this agreement. Executive may not assign his or her
rights or delegate his or her duties under this agreement.
20. Binding Effect. This agreement is binding upon the parties and
their personal representatives, heirs, successors and assigns.
21. Counterparts. This agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, taken
together, shall constitute a single agreement.
22. Complete Agreement. This agreement is the final and complete
expression of the parties' agreement relating to Executive's employment. This
agreement may be amended only by a writing signed by both parties; it may not be
amended orally or by course of dealing. The parties are not entering into this
agreement relying on anything not set out in this agreement. This agreement
shall control over any
-5-
<PAGE> 6
contrary policies or procedures of Company, whether in effect now or adopted
later. Company's policies and procedures that do not conflict with this
agreement, whether in effect now or adopted later, shall apply or not apply to
Executive as determined by Company in its discretion.
DATED as of the date first written above.
EXECUTIVE COMPANY
Jeffrey Sites Trendwest Resorts, Inc.
____________________________ By: __________________________
President
-6-
<PAGE> 1
EXHIBIT 10.29
TRENDWEST RESORTS, INC.
1997 Employee Stock Option Plan
SECTION 1 Purpose. The purpose of the Trendwest Resorts, Inc.
1997 Employee Stock Option Plan (the "Plan") is to enable Trendwest Resorts,
Inc. (the "Company") to attract and retain the services of people with training,
experience and ability and to provide additional incentive to such persons by
granting them an opportunity to participate in the ownership of the Company.
SECTION 2 Stock Subject to Plan. The stock subject to this Plan
shall be the Company's common stock, no par value per share (the "Common
Stock"), presently authorized but unissued or subsequently acquired by the
Company. Subject to adjustment as provided in Section 10, the aggregate amount
of Common Stock reserved for issuance or delivery upon exercise of all options
granted under this Plan shall not exceed 5% of the shares of Common Stock
outstanding from time to time. If any option granted under this Plan shall
expire or terminate for any reason without having been exercised in full, the
unpurchased shares subject thereto shall thereupon again be available for
purposes of this Plan, including for replacement options which may be granted in
exchange for such expired, surrendered, exchanged, canceled or terminated
options.
SECTION 3 Administration. The Plan shall be administered by the
Board of Directors of the Company, in accordance with the following terms and
conditions:
3.1 General Authority. Subject to the express provisions of
the Plan, the Board of Directors shall have the authority, in its discretion, to
determine all matters relating to options to be granted under the Plan,
including the selection of individuals to be granted options, the number of
shares to be subject to each option, the exercise price, the term, whether such
options shall be immediately exercisable or shall become exercisable in
increments over time, and all other terms and conditions thereof. Grants under
this Plan to persons eligible need not be identical in any respect, even when
made simultaneously. The Board of Directors may from time to time adopt rules
and regulations relating to the administration of the Plan. The interpretation
and construction by the Board of Directors of any terms or provisions of this
Plan or any option issued hereunder, or of any rule or regulation promulgated in
connection herewith, shall be conclusive and binding on all interested parties.
The Board of Directors in its sole discretion, may grant incentive stock options
("Incentive Stock Options") as such term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended, (the "Code") and/or nonqualified
stock options ("Nonqualified Stock Options"). A Nonqualified Stock Option is a
stock option which is not an Incentive Stock Option. The type of option granted,
whether an Incentive Stock Option or a Nonqualified Stock Option shall be
clearly identified by the Board of Directors when granted. The term option when
used in this Plan should refer to Incentive Stock Options and Nonqualified Stock
Options, collectively.
-1-
<PAGE> 2
3.2 Delegation to a Committee. Notwithstanding the
foregoing, the Board of Directors, if it so determines, may delegate any or all
authority for the administration of the Plan to a committee of the Board of
Directors (the "Committee") comprised exclusively of two or more Non-Employee
Directors as that term is defined in Rule 16b-3(b)(3) promulgated under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and thereafter
references to the Board of Directors in this Plan shall be deemed to be
references to the Committee to the extent provided in the resolution
establishing the committee.
3.3 Replacement of Options. The Board of Directors, in its
absolute discretion, may grant options subject to the condition that options
previously granted at a higher or lower exercise price under the Plan be
cancelled or exchanged in connection with such grant. The number of shares
covered by the new options, the exercise price, the term and the other terms and
conditions of the new option, shall be determined in accordance with the Plan
and may be different from the provisions of the cancelled or exchanged options.
Alternatively, the Board of Directors may, with the agreement of the Optionee,
amend previously granted options to establish the exercise price at the then
current fair market value of the Company's Common Stock.
3.4 Loans to Optionees. The Board of Directors, in its
absolute discretion, may provide that the Company loan to Optionees sufficient
funds to exercise any option granted under the Plan and/or to pay withholding
tax due upon exercise of such option. The Board of Directors shall have the
authority to make such determinations at the time of grant or exercise and shall
establish repayment terms thereof, including installments, maturity and interest
rate.
SECTION 4 Eligibility. Options may be granted only to persons who,
at the time the option is granted, are directors, employees, consultants or
independent contractors of the Company or any of its present or future parent or
subsidiary corporations (as those terms are used in Section 422(a)(2) and (d)(1)
and Section 424(e) and (f) of the Code, hereafter a "Parent" or "Subsidiary").
Any individual to whom an option is granted under this Plan shall be referred to
hereinafter as "Optionee." Any Optionee may receive one or more grants of
options as the Board of Directors as shall from time to time determine, and such
determinations may be different as to different Optionees and may vary as to
different grants. Optionees who are not employees will only be eligible to
receive Nonqualified Stock Options.
SECTION 5 Terms and Conditions of Options. Options granted under
this Plan shall be evidenced by written agreements which shall contain such
terms, conditions, limitations and restrictions as the Board of Directors shall
deem advisable and which are not inconsistent with this Plan. Each option
granted hereunder shall clearly indicate whether it is an Incentive Stock Option
or a Nonqualified Stock Option. Notwithstanding the foregoing, all such options
shall include or incorporate by reference the following terms and conditions:
5.1 Number of Shares; Exercise Price. The maximum number of
shares that may be purchased pursuant to the exercise of each option shall be as
established by the Board of Directors, provided, however, that the maximum
number of shares with respect to
-2-
<PAGE> 3
which an option or options may be granted to any Optionee in any one fiscal year
of the Company shall not exceed 50,000 shares (the "Maximum Annual Optionee
Grant"). The exercise price of all options granted hereunder shall be as
established by the Board of Directors, but in no event shall be less than the
fair market value per share of the Common Stock at the time the option is
granted, as determined in good faith by the Board of Directors.
5.2 Duration of Options. Subject to the restrictions
contained in Section 9, the term of each option shall be established by the
Board of Directors and, if not so established, shall be ten years from the date
it is granted, but in no event shall the term of any Incentive Stock Option
exceed ten years.
5.3 Exercisability. Each option shall prescribe the
installments, if any, in which an option granted under the Plan shall become
exercisable and the time periods after which such installments shall become
exercisable. The Board of Directors, in its absolute discretion, may waive or
accelerate any installment requirement contained in outstanding options. In no
case may an option be exercised as to less than 100 shares at any one time (or
the remaining shares covered by the option if less than 100) during the term of
the option. Only whole shares shall be issued pursuant to the exercise of any
option.
5.4 Incentive Stock Option. Any option which is issued as an
Incentive Stock Option under this Plan, shall, notwithstanding any other
provisions of this Plan or the option terms to the contrary, contain all of the
terms, conditions, restrictions, rights and limitations required to be an
Incentive Stock Option, and any provision to the contrary shall be disregarded.
The Board of Directors may require an Optionee to give the Company prompt notice
of any disposition of shares of Common Stock acquired by the exercise of an
Incentive Stock Option prior to the expiration of two years after the date of
grant of the option and one year from the date of exercise.
SECTION 6 Nontransferability of Options. Options granted under
this Plan and the rights and privileges conferred hereby may not be transferred,
assigned, pledged or hypothecated in any manner (whether by operation of law or
otherwise) other than by will or the applicable laws of descent and
distribution, or by gift to a revocable trust of which the Optionee is a
trustee, and shall not be subject to execution, attachment or similar process.
Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose
of any option under this Plan or any right or privilege conferred hereby,
contrary to the provisions hereof, or upon the sale or levy or any attachment or
similar process, such option thereupon shall terminate and become null and void.
During an Optionee's lifetime, any options granted under this Plan are personal
to him or her and are exercisable solely by such Optionee. Notwithstanding the
foregoing, the Company may permit an Optionee to, during the Optionee's
lifetime, designate a person who may exercise the option after the Optionee's
death by giving written notice of such designation to the Company (such
designation may be changed from time to time by the Optionee by giving written
notice to the Company revoking any earlier designation and making a new
designation).
-3-
<PAGE> 4
SECTION 7 Certain Limitations Regarding Incentive Stock Options.
The grant of Incentive Stock Options shall be subject to the following special
limitations:
7.1 Limitation on Amount of Grants. As to all Incentive
Stock Options granted under the terms of this Plan, to the extent that the
aggregate fair market value of the stock (determined at the time the Incentive
Stock Option is granted) with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
this Plan and all other incentive stock option plans of the Company, a related
corporation or a predecessor corporation) exceeds $100,000, such options shall
be treated as Nonqualified Stock Options. The previous sentence shall not apply
if the Internal Revenue Service issues a public rule, issues a private ruling to
the Company, any Optionee or any legatee, personal representative or distributee
of an Optionee or issues regulations changing or eliminating such annual limit.
No such limitation shall apply to Nonqualified Stock Options.
7.2 Grants to 10% Shareholders. Incentive Stock Options may
be granted a person owning more than 10% of the total combined voting power of
all classes of stock of the Company and any Parent or Subsidiary only if (a) the
exercise price is at least 110% of the fair market value of the stock at the
time of grant, and (b) the option is not exercisable after the expiration of
five years from the date of grant.
SECTION 8 Exercise of Options. Options shall be exercised in
accordance with the following terms and conditions:
8.1 Procedure. Options shall be exercised by delivery to the
Company of written notice of the number of shares with respect to which the
option is exercised.
8.2 Payment. Payment of the option price shall be made in
full within 5 business days of the notice of exercise of the option and shall be
in cash or bank-certified or cashier's checks, or personal check if permitted by
the Board of Directors. To the extent permitted by the terms of the option grant
and by applicable laws and regulations (including, but not limited to, federal
tax and securities laws and regulations), an option may be exercised by delivery
of shares of Common Stock of the Company which have been held by the Optionee
for a period of at least six months having a fair market value equal to the
exercise price, such fair market value to be determined in good faith by the
Board of Directors. Such payment in stock may occur in the context of a single
exercise of an option or successive and simultaneous exercises, sometimes
referred to as "pyramiding," which provides that, rather than physically
exchanging certificates for a series of exercises, bookkeeping entries will be
made pursuant to which the Optionee is permitted to retain his existing stock
certificate and a new stock certificate is issued for the net shares.
If the Company's Common Stock is registered under the 1934 Act, and if
permitted by the Board of Directors, and to the extent permitted by applicable
laws and regulations, (including, but not limited to, federal tax and securities
laws and regulations) an option also may be exercised by delivery of a properly
executed exercise notice together with irrevocable
-4-
<PAGE> 5
instructions to a broker to promptly deliver to the Company the amount of sale
or loan proceeds to pay the exercise price.
8.3 Federal Withholding Tax Requirements. Upon exercise of
an option, the Optionee shall, upon notification of the amount due and prior to
or concurrently with the delivery of the certificates representing the shares,
pay to the Company amounts necessary to satisfy applicable federal, state and
local withholding tax requirements or shall otherwise make arrangements
satisfactory to the Company for such requirements. In order to implement this
provision, the Company or any related corporation shall have the right to retain
and withhold from any payment of cash or Common Stock under this Plan the amount
of taxes required by any government to be withheld or otherwise deducted and
paid with respect to such payment. At its discretion, the Company may require an
Optionee receiving shares of Common Stock to reimburse the Company for any such
taxes required to be withheld by the Company and withhold any distribution in
whole or in part until the Company is so reimbursed. In lieu thereof, the
Company shall have the right to withhold from any other cash amounts due or to
become due from the Company to the Optionee an amount equal to such taxes. The
Company may also retain and withhold or the Optionee may elect, subject to
approval by the Company at its sole discretion, to have the Company retain and
withhold a number of shares having a market value not less than the amount of
such taxes required to be withheld by the Company to reimburse the Company for
any such taxes and cancel (in whole or in part) any such shares so withheld.
SECTION 9 Termination of Employment, Disability and Death
9.1 General. If the employment of the Optionee by the
Company, a Parent or a Subsidiary shall terminate by retirement or for any
reason other than death, disability or cause as hereinafter provided, any Option
granted hereunder may be exercised by the Optionee at any time prior to the
expiration of three months after the date of such termination of employment
(unless by its terms the option sooner terminates or expires).
9.2 Disability. If the employment of the Optionee by the
Company, a Parent or a Subsidiary is terminated because of the Optionee's
disability (as herein defined), the option may be exercised by the Optionee at
any time prior to the expiration of one year after the date of such termination
(unless by its terms the option sooner terminates or expires), but only if, and
to the extent the Optionee was entitled to exercise the option at the date of
such termination. For purposes of this section, an Optionee will be considered
to be disabled if the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable mental or physical impairment
which can be expected to result in death or which has lasted or can be expected
to last a continuous period of not less than 12 months.
9.3 Death. In the event of the death of an Optionee while in
the employ of the Company, a Parent or a Subsidiary, the option shall be
exercisable on or prior to the expiration of one year after the date of such
death (unless by its terms the option sooner terminates and expires), but only
if and to the extent the Optionee was entitled to exercise the option at date of
such death and only by the Optionee's personal representative if then subject
-5-
<PAGE> 6
to administration as part of the Optionee's estate, or by the person or persons
to whom such Optionee's rights under the option shall have passed by the
Optionee's will or by the applicable laws of descent and distribution.
9.4 Termination for Cause. If the Optionee's employment with
the Company, a Parent or a Subsidiary is terminated for cause, any option
granted hereunder shall automatically terminate as of the first advice or
discussion thereof, and such Optionee shall thereupon have no right to purchase
any shares pursuant to such option. "Termination for Cause" shall mean dismissal
for dishonesty, conviction or confession of a crime punishable by law (except
minor violations), violation of the Company's drug testing policiese, fraud,
misconduct or disclosure of confidential information.
9.5 Waiver or Extension of Time Periods. The Board of
Directors shall have the authority, prior to or within the times specified in
this Section 9 for the exercise of any such option, to extend such time period
or waive in its entirety any such time period to the extent that such time
period expires prior to the expiration of the term of such option. In addition,
the Board of Directors may grant, pursuant to a specific resolution adopted at
the time of grant, modify or eliminate the time periods specified in this
Section 9. However, no Incentive Stock Option may be exercised after the
expiration of ten (10) years from the date such option is granted. If an
Optionee holding an Incentive Stock Option exercises such option, by permission,
after the expiration of the various time periods specified in this Section 9,
and by virtue of such exercise the option is no longer treated as an Incentive
Stock Option under the Code, such Option shall automatically be converted into a
Nonqualified Stock Option.
9.6 Termination of Options. To the extent that the option of
any deceased Optionee or of any Optionee whose employment is terminated shall
not have been exercised within the limited periods prescribed in this Section 9,
including any extension period, all further rights to purchase shares pursuant
to such option shall cease and terminate at the expiration of such period. No
Incentive Stock Option may be exercised after the expiration of ten (10) years
from the date such option is granted, notwithstanding any provision to the
contrary.
9.7 Non-employee Optionees. Options granted to Optionees who
are not employees of the Company, a Parent or a Subsidiary at the time of grant
shall not be subject to the provisions of this Section 9, except as specifically
provided in the option.
SECTION 10 Acceleration upon Change in Control. Notwithstanding any
other provision of the Plan, if the Board determines that a Change in Control
(as defined in the next paragraph) has occurred or is about to occur, the
options theretofore granted hereunder to a person who at the time of the Change
in Control is an employee, consultants or independent contractor of the Company
or any of its subsidiaries shall, subject to the approval of the Board and the
satisfaction of any applicable requirements or limitations of Rule 16b-3 under
the Exchange Act, become exercisable to the full extent theretofore not
exercised, but in no event after the option period specified in each individual
option agreement.
-6-
<PAGE> 7
For purposes of this Section 10 only, a Change in
Control of the Company shall be deemed to have occurred if (A) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities, or (B)
during any period of two consecutive years individuals who at the beginning of
such period constitute the Board and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clauses (A) or (C) of this paragraph) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof, or (C) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the stockholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets.
SECTION 11 Option Adjustments
11.1 Adjustments Upon Changes in Capitalization. The
aggregate number and class of shares on which options may be granted under this
Plan, the Maximum Annual Optionee Grant set forth in Section 5.1, the number and
class of shares covered by each outstanding option and the exercise price per
share thereof (but not the total price), and all such options, shall each be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up, spin-off or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
11.2 Effect of Certain Transactions. Except as provided in
subsection 11.2, upon a merger, consolidation, acquisition of property or stock,
separation, reorganization (other than a merger or reorganization of the Company
in which the holders of Common Stock immediately prior to the merger or
reorganization have the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger or reorganization) or
liquidation of the Company, as a result of which the shareholders of the Company
receive cash, stock or other property in exchange for their shares of Common
Stock, any option granted hereunder shall terminate, but, provided that the
Optionee shall have the right immediately prior to any such merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to exercise his or her option in whole or in part whether or not the
vesting requirements set forth in the option agreement have been satisfied.
-7-
<PAGE> 8
11.3 Conversion of Options on Stock for Stock Exchange. If
the shareholders of the Company receive capital stock of another corporation
("Exchange Stock") in exchange for their shares of Common Stock in any
transaction involving a merger, consolidation, acquisition of property or stock,
separation or reorganization (other than a merger or reorganization of the
Company in which the holders of Common Stock immediately prior to the merger or
reorganization have the same proportionate ownership of Common Stock in the
surviving corporation immediately after the merger or reorganization), all
options granted hereunder shall terminate in accordance with the provision of
subsection 11.2 unless the Board of Directors and the corporation issuing the
Exchange Stock, in their sole and arbitrary discretion and subject to any
required action by the shareholders of the Company and such corporation, agree
that all such options granted hereunder are converted into options to purchase
shares of Exchange Stock. The amount and price of the such options shall be
determined by adjusting the amount and price of the options granted hereunder in
the same proportion as used for determining the number of shares of Exchange
Stock the holders of the Common Stock receive in such merger, consolidation,
acquisition of property or stock, separation or reorganization. The vesting
schedule set forth in the option agreement shall continue to apply to the
options granted for the Exchange Stock.
11.4 Fractional Shares. In the event of any adjustment in the
number of shares covered by any option, any fractional shares resulting from
such adjustment shall be disregarded and each such option shall cover only the
number of full shares resulting from such adjustment.
11.5 Determination of Board of Directors to be Final. All
such adjustments shall be made by the Board of Directors and its determination
as to what adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive.
SECTION 12 Securities Regulations
12.1 Compliance. Shares shall not be issued with respect to
an option granted under this Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, any applicable state
securities laws, the Securities Act of 1933, as amended, the 1934 Act, the rules
and regulations promulgated thereunder, and the requirements of the Nasdaq Stock
Market or any stock exchange upon which the shares may then be listed, and shall
further be subject to the approval of counsel for the Company with respect to
such compliance. Inability of the Company to obtain from any regulatory body
having jurisdiction, the authority deemed by the Company's counsel to be
necessary for the lawful issuance and sale of any shares hereunder, shall
relieve the Company of any liability in respect of the nonissuance or sale of
such shares as to which such requisite authority shall not have been obtained.
12.2 Representations by Optionee. As a condition to the
exercise of an option, the Company may require the Optionee to represent and
warrant at the time of any such exercise that the shares are being purchased
only for investment and without any present intention to sell or distribute such
shares, if, in the opinion of counsel for the Company, such
-8-
<PAGE> 9
representation is required by any relevant provision of the laws referred to in
Section 12.1. At the option of the Company, a stop transfer order against any
shares of stock may be placed on the official stock books and records of the
Company, and a legend indicating that the stock may not be pledged, sold or
otherwise transferred unless an opinion of counsel was provided (concurred in by
counsel for the Company) stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the stock certificate in order
to assure exemption from registration. The Board of Directors may also require
such other action or agreement by the Optionees as may from time to time be
necessary to comply with the federal and state securities laws. This provision
shall not obligate the Company to undertake registration of options or stock
hereunder.
SECTION 13 Employment Rights. Nothing in this Plan or any option or
right granted pursuant hereto shall confer upon any Optionee any right to be
continued in the employment or service of the Company, a Parent or any
Subsidiary of the Company or to remain a director, or to interfere in any way
with the right of the Company, a Parent or any Subsidiary, in its sole
discretion, to terminate such Optionee's employment or service at any time or to
remove the Optionee as a director at any time.
SECTION 14 Amendment and Termination
14.1 Action by Shareholders. The Plan may be terminated,
modified or amended by the shareholders of the Company.
14.2 Action by Board of Directors. The Board of Directors may
at any time suspend, amend or terminate this Plan. No termination, suspension or
amendment of the Plan may, without the consent of each Optionee to whom any
option shall theretofore have been granted, adversely affect the rights of such
Optionees under such options.
14.3 Automatic Termination. Unless the Plan shall theretofore
have been terminated as herein provided, this Plan shall terminate ten (10)
years from the earlier of: (a) the date on which the Plan is adopted; or (b) the
date on which this Plan is approved by the shareholders of the Company. No
option may be granted after such termination, or during any suspension of this
Plan. The amendment or termination of this Plan shall not, without the consent
of the Optionee, alter or impair any rights or obligations under any option
theretofore granted under this Plan.
SECTION 15 Effective Date of the Plan. This Plan shall become
effective on the date of its adoption by the Board of Directors of the Company
and options may be granted immediately thereafter but no option may be exercised
under the Plan unless and until the Plan shall have been approved by the
shareholders within 12 months after the date of adoption of the Plan by the
Board of Directors. If such approval is not obtained within such period the Plan
and any options granted thereunder shall be null and void.
-9-
<PAGE> 1
EXHIBIT 16.1
[MOLATORE, PEUGH, Mc DANIEL, SCREOGGIN & CO. LLP LETTERHEAD]
May 8, 1997
Mr. Gary A. Florence
Vice-President,
Chief Financial Officer
and Treasurer
Trendewest Resorts, Inc.
12301 NE 10th Place
Bellevue, WA 98005
Re: "Change of Accountants" Section for S-1 Filing
Dear Mr. Florence:
We have read the wording of the "Change of Accountants" section for the
Trendwest Resorts, Inc. (the Company) filing on Form S-1. We agree with all
statements made therein with respect to Molatore, Peugh, Mc Daniel, Scroggin &
Co. LLP in its capacity as the predecessor auditors for the Company.
Very truly yours,
MOLATORE, PEUGH, Mc DANIEL, SCROGGIN & CO. LLP
/s/ ROBERT S. Mc DANIEL
-----------------------------------------------
Robert S. McDaniel
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
The Board of Directors
Trendwest Resorts, Inc.
TW Holdings, Inc.
Trendwest Funding I, Inc.:
We consent to the use of our report dated May 2, 1997 except as to note 18 to
the combined financial statements which is as of May 8, 1997 included herein and
to the references to our firm under the headings "Selected Combined Financial
and Operating Data," "Experts" and "Change in Accountants" in the prospectus.
KPMG Peat Marwick LLP
Seattle, Washington
May 9, 1997
